Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

PRIVATE BUSINESS

LLOYDS TSB BILL [Lords]

Order for Second Reading read.

To be read a Second time on Tuesday 17 March.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

The Secretary of State was asked—

BBC World Service

Mr. Cranston: What assessment his Department has made of the role of the BBC World Service in raising the UK's profile in British export markets. [31794]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): The BBC World Service raises the UK's profile in British export markets in two ways. A survey of British business leaders has shown that, through its role as the most trusted international broadcaster, the World Service helps to create a climate favourable to British trade. In addition, the World Service enhances the UK's profile with its reports on the latest developments in science, industry and commerce and presents a picture of Britain attractive to international business.

Mr. Cranston: I thank my hon. Friend for that reply, which acknowledges that the BBC World Service is a real asset on the world stage for this country. My hon. Friend is aware that the BBC World Service is now operating in an environment in which competitors are bringing on the internet and using television and modern forms of radio broadcasting such as FM and digital. Will he lend his support to the strategy of the BBC World Service to meet the challenge from those competitors by using on-line television and modern forms of radio broadcasting?

Mr. Fatchett: I agree with my hon. Friend in his comments about the value of the BBC World Service. It is now broadcasting in 44 languages and reaches more than 140 million people throughout the world. Its reputation is well established. My hon. Friend raises a number of important points about the development of the service. The chief executive had a recent meeting with my right hon. Friend the Foreign Secretary and will have a

further meeting with my noble Friend Baroness Symons to discuss the future. All the issues to which my hon. Friend referred will be taken into account in those discussions.

Dr. Julian Lewis: Is the Minister aware that to remain competitive in the new environment, the BBC World Service believes that it needs a very modest cash injection spread over four years? Is there any hope of that injection being given?

Mr. Fatchett: I realise that the hon. Gentleman was not a Member of Parliament under the previous Government, but he will know what happened to the BBC World Service under them. It was constantly subjected to cuts by the Conservative Government and during that period morale fell considerably. The hon. Gentleman will be delighted to know that morale has now increased. There is a good relationship between the Government and the World Service and funding will continue to be discussed with it. No announcements will be made without the World Service's knowledge.

Mr. Howard: Is not short-wave transmission of the BBC World Service to China jammed? Is that not a vivid manifestation of China's attitude to human rights? Is it not an utter disgrace that, next month at the United Nations Commission on Human Rights in Geneva, for the first time in 10 years, the United Kingdom Government will not support a resolution to draw attention to China's record on human rights?

Mr. Fatchett: I am delighted to hear the right hon. and learned Gentleman taking up human rights. When the Government have made a stance on this issue on other occasions, he has been critical. We are always pleased to see a convert on these issues. The United Kingdom, under the Labour Government, has entered into a constructive dialogue with China on human rights. Mary Robinson, the United Nations High Commissioner for Human Rights, will visit China. That was announced during the visit of my right hon. Friend the Foreign Secretary. We have a record on dialogue with China on human rights of which we can be proud and we shall continue to play a constructive role.

Middle East Peace Process

Mr. Fabian Hamilton: If he will make a statement on Britain's role in the middle east peace process. [31796]

Mr. Gapes: If he will make a statement on the prospects for a comprehensive peace settlement between Israel and its neighbours. [31800]

Sir Sydney Chapman: If he will make a statement on progress with the middle east peace process. [31805]

Mr. Quinn: What plans he has to visit the middle east to discuss the peace process. [31811]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): With the presidency of the European Union, we have launched an intensive European effort to restore momentum to the middle east peace process. In a speech last Thursday, I set


out an EU initiative on the peace process, in three parts. First, I detailed six immediate steps that must be taken to restore confidence in the peace process. In particular, I called on the Government of Israel to make substantial, credible and urgent further redeployments of troops. At the same time, I called on a 100 per cent. commitment from the Palestine National Authority in respect of security.
Secondly, I pledged the EU to provide practical assistance to remove the obstacles in the path of progress. Under the UK presidency, the EU has agreed to renew financial assistance to the peace process which would otherwise expire this year. We shall now work for a joint effort by Europe, the United States, Israel and the Palestine National Authority on how that aid can best boost the peace process.
Thirdly, we shall undertake intensive diplomatic action to break the current deadlock. On Sunday I leave for a tour of Israel, the Palestine National Authority, Egypt, Jordan, Syria and Lebanon. I shall be pressing, in all six places, the urgent importance of restoring progress towards an agreement that provides peace with security for Israelis and peace with justice for the Palestinians.

Mr. Hamilton: I thank my right hon. Friend for that answer. I hope that he will accept my congratulations on his attempt to restart the Oslo peace process with his speech of 5 March. Does he agree with Ziad Abu Ziad, one of Yasser Arafat's deputies, who has said that to be a true friend of Israel one must also be a friend of the Palestinian people? Will my right hon. Friend pass on our congratulations to President Ezer Weizman—a man very much involved in the peace process—on his re-election as President of Israel?

Mr. Cook: I am happy to associate myself with my hon. Friend's congratulations to President Weizman, who has always been a friend of the peace process. My hon. Friend also highlights an important part of the whole issue. At the election, the Israeli people voted for a Government who promised to deliver peace with security. The great majority of Israeli people know very well that there can be no security for them if there is no peace. That is why, in working for a resumption of the peace process, we are working with the overwhelming majority of Israelis.

Mr. Gapes: When my right hon. Friend goes to Syria, will he emphasise to the Syrian Government the importance of Syria's being engaged in the process? Does he agree that if there is to be a comprehensive settlement in the middle east it is not just a question of the relationship between Israel and the Palestinians? All the states neighbouring Israel must also recognise Israel and come to a peace settlement with Israel if there is to be lasting peace in the region.

Mr. Cook: I shall be taking to Damascus the very message that my hon. Friend suggests. It is important that Syria play its part too. The Syrian Government's negotiating position is that they want to start again from where they allege the negotiations broke off under Yitzhak Rabin—an Israeli withdrawal from the Golan heights. It is, however, difficult to make progress from that starting point in present circumstances.
My hon. Friend rightly draws attention to the importance of other dimensions of the peace process. I very much hope that it will be possible to persuade Prime Minister Netanyahu to make concrete his verbal assurances of interest in an Israeli withdrawal from southern Lebanon.

Sir Sydney Chapman: I welcome Israel's proposal to withdraw troops from southern Lebanon. The Foreign Secretary said in his speech last Thursday that no peace plan would be complete in the middle east if it neglected the Syrian and Lebanese tracks. When he goes to Syria, will he put it to the Syrian Government that since Israel is prepared to get out of southern Lebanon, Syria ought to get out of Lebanon?

Mr. Cook: The hon. Gentleman makes a fair point—one of the keys to solving the Lebanese situation and tragedy is to be found in Damascus. I shall certainly raise that issue while I am there. My progress in Damascus will probably be greater if Israel will act on its promises and complete the withdrawal, which the hon. Gentleman seemed to imply had already taken place.

Mr. Quinn: Does my right hon. Friend agree that there is much frustration among hon. Members at the lack of progress in the peace process in the middle east? Why is there no opportunity for him to visit the kingdom of Saudi Arabia, so that it may help to bring about a rapid and successful harmonisation in the middle east?

Mr. Cook: I am happy to tell my hon. Friend that I visited Saudi Arabia last month. The focus of that visit was to discuss the then confrontation with Iraq, but we did, of course, touch on the peace process. My hon. Friend will be aware that across much of the middle east an unfair comparison was made between our robust approach to Iraq and our alleged weakness towards Israel. I very much hope that the clear, resolute approach that I took in my speech and the comprehensive visits that I am making to the region next week will make it abundantly clear to all that Britain takes fully its responsibility under the resolutions on the middle east—as we do under the resolutions on Iraq.

Mr. Menzies Campbell: I, too, commend the Secretary of State on the terms of his speech last week, in particular his recognition of the importance of Syria and Lebanon and his call for an immediate halt to the settlements. As he knows, the settlements are in breach of resolution 242, which sought to provide a homeland for the Palestinian people. Does he accept that not only are the settlements wrong in international law, but they are a continuing and damaging source of provocation to Palestinians?

Mr. Cook: The hon. and learned Gentleman makes a fair point and one that is central to the peace process. Mr. Netanyahu has sought an early resumption of final status talks. I would welcome the possibility of proceeding to final status talks, but it will be extremely difficult to engage the Palestine National Authority in final status talks unless some concrete progress can be seen on the ground, in particular an end to provocations such as the expansion of the settlements. We have


continually condemned such provocation and I hope during my visit next week to visit Har Homa and to express that view there in person.

Mr. Wilkinson: When the Foreign Secretary goes to Israel on behalf of the EU presidency to try to bring about peace, will he bear in mind the extent to which the Israeli people have grievously suffered from terrorism? Does he believe that the standing and authority of the European Union and Her Majesty's Government will have been enhanced in the eyes of the Israeli Government by the Government's decision not to accede to the extradition request of the German authorities in respect of Miss McAliskey, who was arraigned under terrorism charges in the federal republic? Will he bear it in mind that the European Union should be seen to encourage the rule of law and to be resolute in cross-border co-operation against terrorism?

Mr. Cook: My general impression is that the middle east peace process already suffers from too many linkages being made. To make a linkage to peace in Northern Ireland is to ensure that no progress is made. On that case, it has been made perfectly clear that the release was on humanitarian and medical grounds. It in no way diminishes the long-standing position of Britain in resolute opposition to terrorism. While I am in the Palestine National Authority I will make it clear that progress on the peace process must be matched by tough progress on security as well.

Dr. Palmer: Will my right hon. Friend take the opportunity of his visit to encourage progress towards the construction of a Palestinian airport in Gaza? We have seen press reports suggesting that the Israeli Government are ready to move on that. Does my right hon. Friend agree that it would be a substantial step forward, which would encourage Palestinians to feel that the process was working in their favour too?

Mr. Cook: There are four interim agreements on which progress could be made, which would help immensely to boost the political process. One is the airport; another would be the industrial estate on the border; the third would be the sea port; and the fourth would be the southern free passage. Europe currently puts a great deal of financial assistance into the peace process. We put in twice as much as the United States. I would like to see our money targeted more on helping projects that would break through the obstacles to the peace process. I shall explore in particular how Europe's commitment to continuing aid can be used to unblock the obstacles to the airport and the sea port. My hon. Friend is quite right: if we could achieve that, not only would it be a visible help to the Palestinian economy, but it would go a long way towards building confidence between the parties to the peace process.

Mr. Faber: I, too, return the Foreign Secretary to his speech of last week, particularly to the six key steps that he rightly identified as marking the start to unblocking the peace process—five of which I believe require joint or unilateral action by Israel. Can the Foreign Secretary confirm that, during his meeting with Mr. Netanyahu at the weekend, the Prime Minister forcefully pressed all five of those issues? Did he seek, and indeed receive,

any commitments from the Israeli Prime Minister? If he did not receive any assurances, what action do the Government propose to take to bring further pressure to bear on the Israeli Government to see that the demands are met, and within what time scale?

Mr. Cook: I thank the hon. Gentleman for saying that they are the right six steps: I am glad that the approach has bipartisan support. I am glad also that the hon. Gentleman asked that question as it gives me the opportunity to rebut some of the claims that I understand have appeared in the Israeli press in the past 24 hours to the effect that the Prime Minister took a different position from me in my speech last week. I am pleased to tell the House that there is absolutely no difference between the Foreign Office and No. 10 on this issue: every word in my speech was cleared and discussed with No. 10 before the speech was made.
The whole Government stand behind the speech and the points that I spelled out in it. As to what further pressure is now required, I discussed with my opposite number, Madeleine Albright, on Monday where we go from here. We shall jointly increase pressure for a positive response from Israel.

Zambia

Mr. Goggins: What representations he has made about the state of emergency in Zambia. [31798]

The Minister of State, Foreign and Commonwealth Office (Mr.Tony Lloyd): We have urged the Zambian Government quickly to complete their investigations into the coup attempt, to charge or release detainees, to address claims of torture and to lift the state of emergency soon. We note that most of the detainees have now been charged.

Mr. Goggins: I thank my hon. Friend for his reassuring answer. Does he agree that last October's failed—some might say rather pathetic—coup attempt in Zambia is symptomatic of a country that spends four times as much on debt relief as on health care, which is rife with corruption and where, in the words of ex-President Kaunda, there are no jobs, only people dying of hunger? Will my hon. Friend assure the House that the Government will do everything within their power to encourage good governance and sensible economic reform in that country so that the impoverished people of Zambia can look forward to a more hopeful and stable future?

Mr. Lloyd: In many ways, the real tragedy of Zambia is that the present Government seemed to be making real progress, so when the attempted coup took place and President Chiluba quite correctly told his people to go about their business, it was all the more bizarre and surprising that he then announced a state of emergency. Even more deplorable was the continuation of that state of emergency in January.
We want Zambia to get back on a proper path of reconstruction for the benefit of its people. However, that will mean lifting the state of emergency and bringing to speedy and fair trial those who have been detained. Before the rest of the world is ready to begin the real process of helping those who are most impoverished by the situation


in Zambia, the Zambian Government must commit to a drive against corruption and to the restoration of constitutional order.

Mr. Wells: What representations have Her Majesty's Government made to the Government of Zambia, and particularly the President, on behalf of ex-President Kaunda? Is it not outrageous that, first, he has been banned from standing in Zambian elections and, secondly, as I understand it, he remains under house arrest? If he has been charged, I do not believe that he has been brought to justice. That is thoroughly anti-democratic and something that we cannot possibly support.

Mr. Lloyd: I make it quite clear that former President Kaunda is only one of some 100-plus people who were detained, initially without charge. I am glad to inform the House that subsequently the former President has been charged—although we are very concerned about the nature of the charges that have been laid. They include having knowledge of a conspiracy to overthrow the Government, which is very unusual. I cancelled my visit to Zambia at the time of the former President's detention because it would have been impossible to go ahead in the circumstances. We shall continue to urge the Zambian Government to lift the state of emergency and ensure that the former President, as well as all the other detainees, has a fair and speedy trial.

Mexico

Helen Jones: What representations he has made to the Government of Mexico about human rights in Mexico. [31801]

Mr. Tony Lloyd: My right hon. Friend the Foreign Secretary discussed the human rights situation in Mexico with the new Foreign Minister, Mrs. Green, on 12 February in Panama City. He made clear our concerns that those arrested in connection with the massacre in Chiapas should be brought to trial and that there should be no immunity for those with connections with municipal or state government. I discussed human rights issues with Mrs. Green's predecessor last November.

Helen Jones: I thank my hon. Friend for that reply. Does he agree that one of the best ways to protect human rights in Mexico is to support the growth of free and independent trade unions, which already receive support from the Trades Union Congress and other democratic unions? What plans does he have to assist trade unions in their development?

Mr. Lloyd: I agree with my hon. Friend. The development of a fair and democratic society in Mexico depends not only on the growth of proper, democratic political parties and a political system but the growth of civil society more generally. The trade union movement in Mexico is an important component—as it is in this country, certainly under this Government—in underwriting the freedoms of the people of Mexico. I met the Mexican trade unions when I visited Mexico just before Christmas and had long and interesting conversations with them about the future of democratic and free trade unions in that country.

Iraq

Mr. Ian Taylor: If he will make a statement on the role played by the EU presidency in the negotiations over the situation in Iraq. [31802]

Mr. Robin Cook: As we have the presidency of the European Union, Britain has maintained close contact with our partners throughout the crisis. In early February, I chaired a special meeting of the General Affairs Council on Iraq. On the weekend of the Secretary-General's visit to Baghdad, the General Affairs Council agreed a policy statement that welcomed the outcome, insisted that Iraq comply with Security Council resolutions and noted that the international community had needed to show firm resolve to achieve agreement.
My right hon. Friend the Prime Minister spoke in person or by telephone to the Heads of Government of many other European member states and all the major nations. In New York, the United Kingdom worked closely with Sweden and Portugal, which are currently members of the Security Council, in co-sponsoring the resolution that more than doubles the oil-for-food programme.

Mr. Taylor: Although the Foreign Secretary finds close proximity with Madeleine Albright exhilarating and, over the Iraq affair, there was absolutely no doubt that our interests and those of the United States were very much in harmony, will he recognise that that will not always be the case? What practical steps is he taking to ensure moves to more effective common European foreign policy? In what aspects will that be likely to be deployed during the EU presidency and immediately thereafter?

Mr. Cook: I am not sure that exhilarating is quite the word that I would choose to describe it, but it is a great asset for Britain that the two Foreign Secretaries work closely together and often share each other's thinking.
On the wider question of common foreign and security policy, during the short period of our presidency we have already demonstrated large agreement in taking forward initiatives. For instance, we now have a new common position on Iran, and I hope that on the basis of that common position in Europe we shall be able to bridge some of the transatlantic gulf. We also acted speedily to find both a foreign and a domestic response to the emigration of Kurdish refugees from Turkey and Iraq. We took a quick initiative in relation to Algeria. The Minister of State, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), led a troika to Algeria and, over the past week, we have been working hard to ensure that Europe is in the lead in response to the current crisis in Kosovo. I shall discuss all those issues and others with my Foreign Minister colleagues when I welcome them to my home town of Edinburgh at the weekend.

Mr. Winnick: Do our EU partners fully accept that if the Iraqi regime breaks the agreement which, fortunately, has been reached, there will be most serious consequences, as stated in the latest United Nations Security Council resolution, and the most serious consequences will mean precisely that—there will be no second chance?
Will my right hon. Friend consider further the possibility of humanitarian relief to the first victims of that criminal regime—the civilians? Is there any possibility of aid being flown in, albeit only on the basis that we are satisfied that it will be used for civilians, particularly children, who are undoubtedly suffering—not from sanctions, but from the Iraqi Government's policy?

Mr. Cook: I can confirm that the resolution that we drafted and presented to the Security Council makes it clear that if Iraq breaks the agreement there will be the severest consequences. We resisted attempts to produce a lesser phrase.
My hon. Friend raises an important issue that we must now address: the humanitarian needs of the people of Iraq. In my speech last Thursday I set out our intention as presidency of the European Union to convene a meeting with the European nations, some leaders of the Arab world and non-governmental organisations to work out how we can make best use of the doubling of the oil-for-food programme that we have steered through the United Nations. It is not enough to ensure that that money is not mis-spent; we must ensure that it is spent properly. If Saddam Hussein blocks our initiative to bring medicine, food and humanitarian relief to his people, it will be clear to all the world that it is not the west or the international community but Saddam who is responsible for their suffering.

Mr. Howard: Is not the simple truth that there was no agreement in the EU about the nature of action to be taken on Iraq and that contrary to the question just asked by the hon. Member for Walsall, North (Mr. Winnick), France revealed in the discussions at the Security Council an interpretation of the resolution that differed sharply from that of the UK Government? Why does not the Foreign Secretary say in a straightforward manner that there was no agreement in the EU on that, instead of indulging in self-satisfied waffle?

Mr. Cook: If the right hon. and learned Gentleman is genuine about putting pressure on Iraq and wants Saddam Hussein to listen to the international community, it might be responsible for him to tell Saddam Hussein and the House the self-evident truth that the great majority of members of the EU shared Britain's position and that when Kofi Annan went to Baghdad he went with the agreement of all five permanent members. The right hon. and learned Gentleman undermines the efforts of the international community when he tries to suggest that there are deep divisions.

Mr. Dalyell: Does my right hon. Friend's answer to my hon. Friend the Member for Walsall, North (Mr. Winnick) mean that he rejects the view of the Chinese ambassador to the United Nations, that in no way does the Kofi Annan agreement give authority for Anglo-American—

Mr. Winnick: It does.

Mr. Dalyell: My hon. Friend is very sure that it does; I am just asking the question. Does it give authority for Anglo-American military action without going back yet again to the Security Council?

Mr. Cook: I would say gently to my hon. Friend that when we want legal advice we may look elsewhere than to

the Chinese ambassador at the United Nations. He himself voted for the resolution, which is explicit: if Iraq breaks the agreement, there will be the severest consequences.

EU Enlargement

Mr. Pickles: Which countries will be represented at the EU enlargement summit on 12 March. [31803]

Mr. Robin Cook: The Luxembourg European Council agreed that the member states of the European Union, the 10 countries of central Europe that have applied to join the Union, Cyprus and Turkey should be invited to participate in the European conference.
Accordingly, my right hon. Friend the Prime Minister has invited his colleagues in those countries to attend the first meeting of the European conference, which he will convene in London on Thursday. It is expected that the conference will agree to practical co-operation in areas of immediate relevance to the public, such as combating the drugs trade and organised crime, improving the environment and building competitive economies. The European conference will be important chiefly because it represents an historic first step towards a stronger, enlarged European Union and a final end to the division of Europe which has scarred our continent for half a century.

Mr. Pickles: Does the Foreign Secretary agree that the progress made by the Polish people since the fall of communism has been truly breathtaking, and that there is great vitality among the upcoming leadership there? Does he believe that it is in the interests of not only Poland, but this country and the strengthening of the European Union that Poland should become a member? Given that not all our partners share our enthusiasm for Polish entry, will he give an undertaking to the House that sufficient momentum will be built up under the British presidency to ensure that any qualifications and problems can be quickly addressed?

Mr. Cook: I can assure the hon. Gentleman that Britain fully backs the enlargement of the European Union and recognises that Poland is a prime candidate for enlargement. I said that in a speech in Warsaw when I visited that city just before Christmas. In the past three days, I have spoken twice to the Foreign Minister of Poland, who currently occupies a position of great importance as the chairman of the Organisation for Security and Co-operation in Europe for the whole of Europe. We are working closely with him and with his Government, and we shall be delighted to assist them in the process of negotiations because we regard the negotiations not as confrontational, but as between two partners seeking a common objective—the enlargement of the European Union, and stability and democracy throughout central Europe.

Mr. Dismore: Does my right hon. Friend agree that it would be in the best interest of all Cypriots if Cyprus were to accede to the European Union? In that context, will he take the opportunity to confirm that accession talks will not be dependent on or linked to progress in peace negotiations and, in particular, that accession talks will not be subject to veto by the regime in northern Cyprus?

Mr. Cook: I can confirm that there will be no veto for the regime in northern Cyprus. However, the people of


northern Cyprus have more to gain than anybody else in Cyprus from EU membership as their income level is currently a quarter of that of the Greek Cypriot part of Cyprus. For those reasons, we have urged the Government of Cyprus to bring a mixed delegation of Greek Cypriot and Turkish Cypriot negotiators. I am pleased to say that there are signs that President Clerides and his Government are willing to do that. I regret to say that the present stubbornness on the Turkish Cypriot side may prevent that from happening.

Mr. Streeter: Does the Foreign Secretary recall saying, on 14 January, that the Government would be working hard to strengthen relations between the EU and Turkey? Does he recall the Prime Minister saying, in December last year, that he wanted to see Turkey as a closer partner in Europe and as part of the European conference that would be held in Britain in the next year? Does he accept that Turkey's decision to boycott the conference on Thursday represents a major diplomatic failure by the Government? Will he tell the House what he intends to do to secure Turkey's future involvement in that vital process?

Mr. Cook: If the hon. Gentleman says that in Ankara, he will be given a robust raspberry by the Government there, who know perfectly well how hard Britain has worked to involve Turkey and to resist the Luxembourg conclusions which they have found so offensive. I discussed this with my opposite number in Turkey over the weekend. Turkey is invited and it is for that country to decide whether to attend. It has decided that, in view of the conclusions of the Luxembourg conference, it will stand by the view it expressed then that it will not be coming. My colleague, the Minister of State, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), and I have agreed that after the European conference, we will look for other ways in which to take forward our dialogue, probably through the association partnership, on which the Commission is about to produce interesting and detailed proposals.

Mr. Pike: Does my right hon. Friend recognise that the people of Romania welcome the fact that he has indicated that it is possible for that country to get on to the fast track for entry into the European Union? Will he be meeting President Constantinescu of Romania this week to spell out what steps need to be taken in Romania to ensure that it can enter the European Union on the earliest possible date?

Mr. Cook: I am pleased to say that Romania will be one of those participating in the European conference. Like all the other conference members from central and eastern Europe, it will participate in a meeting with the Prime Minister, and its Foreign Minister will participate in a meeting with me. I have met the new Foreign Minister of Romania to discuss how we take forward the enlargement process. The Foreign Office has agreed to provide specific technical expert help to the Romanian Foreign Office to help it build up expertise for the negotiations. My hon. Friend's first point is quite right; just because negotiations start with six specific members does not mean that those six will be the first across the line. All 11 have every incentive to make as much progress as possible. Those who get in first will be those who have made the most progress.

Iraq

Mr. Leigh: If he will make a statement on Iraq. [31806]

Mr. Alan W. Williams: If he will make a statement on progress towards removal of weapons of mass destruction in Iraq. [31808]

Mr. Robin Cook: Britain played a key role in drafting Security Council resolution 1154 which was adopted unanimously by the Security Council last week. It provides a clear endorsement by the whole of the international community of the agreement between the Secretary-General and the Iraqi authorities. The resolution makes it clear that if Saddam Hussein breaks the agreement, there will be the severest consequences. I am pleased to report that inspections resumed in Iraq last Friday. International inspection has made good progress in halting the Iraqi nuclear and missile programmes. The United Nations Special Commission has now dismantled more weapons than were destroyed during the Gulf war. However, the Iraqi capacity for chemical and biological weapons production remains immense. We are determined that such a capacity cannot be left in the hands of Saddam Hussein, who has repeatedly used chemical weapons in the past and cannot be trusted not to use them in the future.

Mr. Leigh: Is the Foreign Secretary satisfied that Iraq is fully complying with the UN accords? Would he like to comment on the accusation that it is fairly worthless allowing inspectors into presidential sites because, by the time of inspection, they will be cleared of any weapons of mass destruction, which will be taken elsewhere? Therefore, there must be continued access. Can the Foreign Secretary confirm that if, at any future date, the Americans decide to use force, we shall stand four square with them?

Mr. Cook: The answer to the last point is that we remain in constant contact with the United States. We stood resolutely together during a confrontation, and we will do so if there should be a future confrontation. I am not sure whether I shall disappoint the hon. Gentleman if I say that inspections have been proceeding well over the three days since Friday. There is no question of one-off inspections—that was one of Saddam' s initial bargaining positions, and it was one of the issues on which he was forced to climb down. The agreement represents a success for our strategy and, if properly carried out, will enable us to halt him in developing weapons of mass destruction.

Mr. Williams: It is seven years since the Gulf war, and it has taken that long for UNSCOM to uncover these chemical and biological weapons. Does my right hon. Friend agree that the present inspection crisis has to be resolved in a matter of weeks or months rather than years, that those weapons must be rendered harmless and that, if Iraq co-operates, economic sanctions can be lifted in that time scale?

Mr. Cook: The resolution we drafted and presented to the Security Council makes it clear that there is light at the end of the tunnel for the Iraqi people. Sanctions


can be lifted if Saddam carries out the obligations to which he has again signed up. The reason we are here, seven years on from the original resolution, is precisely because Saddam has practised a continuous programme of deception and concealment. I cannot accept that we should put a deadline on when the inspectors withdraw; when they withdraw must be decided by when they have finished their business. However, I agree that it could be done in weeks if Saddam Hussein would, for once, honestly accept his responsibilities and fully co-operate with inspectors.

Mr. Cash: The Foreign Secretary and the Government deserve congratulations on the solidarity they have shown with the United States over Iraq. To refer to a previous question, may I ask the right hon. Gentleman to indicate what sort of phone calls the Prime Minister had with the other member states in Europe? Furthermore, what did the Prime Minister mean in his statement to the House the other day when he said that we had support from the EU member states? What specific and practical military commitments were the other member states prepared to make to support the United States and the United Kingdom in what could have turned out to be the necessity for direct military action?

Mr. Cook: I am happy to answer the hon. Gentleman's question. Belgium and the Netherlands provided a frigate for the fleet; Denmark provided transport aircraft; Sweden was willing to provide medical and logistical troops for support; and Portugal, Spain and Germany offered and made available use of their bases for planes flying on to the Gulf. Those European nations that were asked to help all did so.

Ann Clwyd: Given the growing support among our European Union partners and many other countries in the world for the indictment of Saddam Hussein and some of his closest associates before an international criminal court, has my right hon. Friend thought about some of the other ideas proposed by the Iraqi opposition, which include lifting the sanctions in northern Iraq, supporting the installation of a provisional Government in northern Iraq and installing a no-drive zone in that area to protect it in the same way as the no-fly zone is protected?

Mr. Cook: This is an issue that we keep constantly under discussion, not just among ourselves, but with our partners. However, what my hon. Friend asks for involves a step that can be taken only with great seriousness and solemnity. We are very much aware that when people in Iraq were invited to rise up in 1991, they were then abandoned and there were many casualties among those who had taken us at our word. For that reason, there is a grave responsibility on us not to encourage people to take action which we then cannot follow through.

Agenda 2000

Mr. Boswell: What activities in relation to Agenda 2000 have been initiated under the British presidency. [31809]

The Minister of State, Foreign and Commonwealth Office (Mr. Doug Henderson): The Council has

approved the framework regulation for the accession partnerships, which will be the principal plank of the EU's relationship with the countries of central and eastern Europe over the coming years. We shall launch the European conference, which will bring together the member states and candidate countries, in London on Thursday.
We expect the Commission to table draft regulations for the reform of the common agricultural policy and the structural and cohesion funds, and proposals for the future financing of the EU on 18 March. Those are only the most immediate activities. We expect that the Cardiff European Council in June will record good progress on Agenda 2000 during our presidency.

Mr. Boswell: Although the Minister will have heard the discouraging noises coming from Brussels last week about the possible withdrawal of Community support for aid to the British regions, will he ensure, in the forthcoming conference and subsequently, that he sits down with our existing partners in Europe so that any burdens of transfer to the applicant countries under Agenda 2000 are fairly shared and so that British interests are robustly represented?

Mr. Henderson: I am happy to reassure the hon. Gentleman that the position that he outlines is the one that the Government will adopt. As we support the enlargement process, it is important to have a funding system, which means that some of the structural funds must find their way to central and eastern European countries to help them. That means that less funding will be available from the structural cake for the existing European Union states, so it is important to have a fair burden share. That will be a principal objective in our negotiations.

Mr. Bill O'Brien: Does my hon. Friend accept the great importance of the structural funds to many of our regions, particularly Humberside, because of the economic development of those regions? Will he assure the House that during our presidency, he will lay the foundations necessary to ensure fairness and equity in the distribution of the structural funds so that our regions may continue with their economic progress?

Mr. Henderson: I hope that I can reassure my hon. Friend that a principal objective in our negotiations will be to seek a fair solution, part of which is that areas within the European Union that have similar characteristics and a similar need for help will get help. Many areas near my hon. Friend's constituency would qualify, and I hope that we can protect them on the basis of achieving a fair settlement.

Mr. Gill: The Minister mentioned reform of the common agricultural policy; he will appreciate that to get any fundamental reform of the CAP will require unanimity. What realistic prospect is there of achieving unanimity in the European Union at present?

Mr. Henderson: There is a growing recognition in the European Union that the current agricultural policy is wasteful and that a better way in which to support agricultural interests in the Community could be found. That is recognised in many countries that have previously


taken a pretty reactionary view. The prospect of enlargement will force the European Union to look at agricultural policy. I believe that with tough negotiation and perseverance, we can begin to make progress towards bringing agricultural prices in Europe down towards world prices, which will be good for the consumer. Finding the right sort of support for agricultural interests will give the greatest support to those parts of the industry with the greatest need.

Mr. Skinner: Is my hon. Friend aware that we have been talking about reform of the common agricultural policy ever since Britain joined the Common Market on 1 January 1973? I do not see it coming any nearer. If it ever comes about that a policy is presented here in Parliament to reform the CAP, those 142,000 people, or however many went on the countryside march, will be knocking at every single door here, telling the British Government that they do not want it. All those Tory and Liberal Democrat Members of Parliament who theoretically support CAP reform will say, "No, we can't afford it."

Mr. Henderson: I am grateful to my hon. Friend, but I had thought that he was more of an optimist and would be looking forward to changes in agricultural policy. I think that he can reassure me that, in the event of large numbers of sectional interests arguing against changing agricultural policy, he will be able to persuade many millions of consumers in our country that some of the changes, at least, will be in their interests—and they will turn up to show their support.

Departmental Commercial Sections

Ms Jenny Jones: If he will make a statement on his Department's commercial sections' priorities for 199873x2013;99. [31812]

Mr. Fatchett: Our priorities will be to implement a new export initiative based on the recommendations of the Export Forum, and to continue to make the Foreign Office more businesslike through interchange with the private sector.

Ms Jones: I thank my hon. Friend for that answer. What action is he taking to ensure that the relevant overseas posts are aware of the new priorities in this Government's export drive? What arrangements will be put in place to ensure that, in future, all commercial inquiries are dealt with quickly and effectively?

Mr. Fatchett: On the final point, we work closely with our colleagues in the Department of Trade and Industry and we will ensure that there is an improved service for potential exporters. It is fair to say that the Foreign Office has become more commercially minded. More than one third of our full front-line staff time is now devoted to export and commercial activity. We have 217 commercial posts, and we are determined to ensure that we become more businesslike and are more successful in selling Britain. We have to improve on the record of the previous Government; we shall do so and are taking all the right steps to do so.

Mr. Soames: I thank the hon. Gentleman for his reply. Does he agree that the Foreign Office has, for a long time,

been moving towards becoming much more commercial? When I had anything to do with the Foreign Office, I was always very impressed by its effectiveness in promoting British trade. Will the Minister acknowledge the extraordinarily powerful role that is played by defence in commercial diplomacy, not just in terms of weapon sales—where, clearly, the expertise of the British forces and the sophistication of their equipment commands ready markets overseas—but through a range of other goods and services, where the skills of our forces are well deployed in showing how they work so well?

Mr. Fatchett: I am grateful to the hon. Gentleman for his opening remarks. I will certainly ensure that those remarks are drawn to the attention of those staff involved in commercial activities. It is important for all of us that we continue to make strong efforts to promote Britain's exports. As the hon. Gentleman knows, defence sales are an important part of Britain's export activities and an important signal of Britain's export technology. We regulate those sales in a manner that has always been exercised by Government. Although we are determined to do that, we shall ensure that there is due process and due support for export industries, including the defence industry.

Bosnia

Ms Southworth: When he next intends to visit Bosnia. [31813]

Mr. Robin Cook: I am pleased to be able to tell my hon. Friend that I visited Bosnia on 4 March. I was encouraged by the significant progress that has been made—particularly on the key issues of corruption, black-marketeering and poor transparency in the use of public funds, which I highlighted on my visit in July. It is a sign of the new mood in Bosnia that I was invited to address an assembly of the Republika Srpska—the first Foreign Minister to do so.
The new Government of Prime Minister Dodik have made more progress on the Dayton peace process in two months than his predecessor did in two years. However, much remains to be done. I stressed during my visit the need for more rapid results in the return of refugees to their homes, and the central importance that Britain attaches to the prosecution of all those indicted for war crimes. If we want to build a future for Bosnia based on ethnic tolerance, we must be resolute in bringing to justice those who committed the atrocities of ethnic cleansing.

Ms Southworth: I congratulate my right hon. Friend on the dramatic changes that have occurred in Bosnia since last summer. I congratulate him also on the moves that have been made towards implementing the Dayton treaty, which is so important to so very many people. Does he agree that those changes are a vindication of the tough stance that he and his colleagues took at their meeting, last June, in Sintra?

Mr. Cook: I am grateful to my hon. Friend. I agree that the progress that has been made in Bosnia is entirely the result of the resolute approach from outside Bosnia, coupled with the will of many people in Bosnia for peace. One of the central challenges that we now face, if we are to secure and stabilise that peace, is to ensure that we


also tackle the regional dimension provided by Bosnia's neighbours. One very important message that I sent in Sarajevo is that there is no map of Europe that has on it any place for a greater Croatia or a greater Serbia.

Algeria

Mr. Waterson: What assessment he has made of the human rights situation in Algeria following the recent EU troika mission. [31815]

Mr. Fatchett: The Government continue to be concerned about the situation in Algeria. We discuss human rights in our bilateral contacts with the Algerians and as the European Union presidency. We are encouraging parliamentary exchanges, greater access by international media and visits by United Nations rapporteurs to strengthen democracy and the rule of law in Algeria.

Mr. Waterson: I thank the Minister for that answer. Does he agree that it is an absolute disgrace that, in this day and age, a country such as Algeria is being terrorised and brutalised, that many people are being murdered in terrorist activity, and that those atrocities have so little resonance in the world outside? Is there not more that we could do, as an individual nation and through the European Union, not only to put the spotlight on those dreadful atrocities, but to try to end them?

Mr. Fatchett: In our presidency, the United Kingdom has already taken one initiative on behalf of the European Union, responding to public concern in Europe. I led a European Union troika visit to Algeria. We established a political dialogue with the Algerian Government—part of which was to discuss the terrorist situation there—which we hope will continue. On behalf of the European Union, I invited the Algerian Minister of Foreign Affairs to come to London during the United Kingdom presidency to meet my right hon. Friend the Foreign Secretary.

Mr. Corbyn: Has the Minister had an opportunity to discuss the proceedings of the parliamentary human rights group, which held an open meeting to take evidence on abuses of human rights in Algeria from a wide variety of sources—although the ambassador himself refused to attend? Is he aware that much of the evidence received by

the group seemed to suggest that many of the human rights abuses and illegal killings in Algeria emanated from the army or from elements in Algerian society that are close to the army, and that there must be a very robust exchange with the Algerian Government if we are to put a stop to the killings there?

Mr. Fatchett: I have had the opportunity to read that evidence, which was shocking. It again made the point that, sadly, life is cheap in Algeria, and that too many lives have been lost there. During my visit to Algeria, I stressed to the Algerian Government that it was important for them to be open and accountable in their human rights record. I also suggested that the United Nations special rapporteurs should visit Algeria, so that they have an opportunity to report on some of the issues that have been raised by my hon. Friend. I think that that is very much the best way for the Algerian Government to deal with all the allegations and potential criticisms that have been made of them.

EU Enlargement

Mr. McNulty: What progress he has made towards achieving enlargement of the European Union; and if he will make a statement. [31816]

Mr. Doug Henderson: Our preparations for enlargement are on schedule. In two days, we will inaugurate the European conference. We will launch the accession process in Brussels on 30 March, and accession negotiations with six candidates will begin the next day.

Mr. McNulty: I welcome the Government's initiative in holding the conference between EU member states and applicants this Thursday. Can my hon. Friend assure me that enlargement will remain a top priority throughout the United Kingdom's presidency, and in years to come? Does he agree that we have learnt something that the Tories have never learnt—that it is not possible to be serious and positive about enlargement while being negative about the European Union?

Mr. Henderson: That is a good point. The difference between our approach to enlargement and that of the previous Government is that we believe that enlargement is important for the security of Europe and for its economic prospects. We do not favour it simply as an alternative to the deepening of the European Union.

Kosovo

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): With permission, Madam Speaker, I will make a statement on the crisis in Kosovo.
On Monday, I chaired a meeting of the six-nation contact group, which consists of Britain, the United States, the Russian Federation, France, Germany and Italy. The group met in London at my invitation. We issued a comprehensive statement, copies of which have been placed in the Library.
The whole House will share the grave concern expressed by all nations at the contact group meeting about the events in Kosovo of the past two weeks. The security operations around Dreniza in the last week appear to have left at least 80 dead. It is simply not credible that all those killed were terrorists. Of the 51 corpses released yesterday by the Serb police, less than half are believed to have been men of military age. The local press reports that 12 were children, 13 were women and four were elderly men.
Belgrade cannot claim that such extra-judicial killings are a purely internal matter. The international community has a legitimate right and a duty to condemn such gross violations of human rights. Europe has a particular responsibility to reduce violence in the Kosovar region before it produces instability in neighbouring countries.
I visited Belgrade last Thursday. I made it clear that I did so not just on behalf of Britain, but as the presidency of the European Union. I regret to tell the House that President Milosevic sought to present the events in Kosovo as a legitimate police response to terrorism. Britain's record against terrorism is firm and resolute. We strongly condemn the use of violence for political objectives, including the terrorism of the self-styled Kosovo Liberation Army. Terrorism, however, cannot be used as a pretext for the indiscriminate use of force against the civilian population.
While I was in Belgrade, I spoke to leaders of the Kosovar people, including Dr. Rugova. That leadership advocates a peaceful pursuit of legitimate political views. The international community does not support separatism in Kosovo; we do demand that Belgrade provide enhanced and real autonomy for Kosovo, without which the demands for independence are only too likely to grow. It is the tragic irony of Kosovo that its people enjoyed more autonomy under the communists than they have under President Milosevic.
On Monday, the contact group approved a lengthy statement expressing our dismay at the current repression and condemning the excessive use of force. We approved a 10-point action plan to stabilise the security position in Kosovo. Let me highlight four key objectives.
The first is justice. We urged the prosecutor of the war crimes tribunal to investigate the recent violence in Kosovo, and we invited independent forensic experts to investigate the allegations of extra-judicial killings. Those responsible for repression in Kosovo are now on notice that they cannot act with impunity.
The second objective is international monitoring within Kosovo. We called for access to Kosovo for the Red Cross and for all embassies of the contact group in

Belgrade. We also supported a new mission by Felipe Gonzalez as the personal representative of the chairman of the Organisation for Security and Co-operation in Europe. If Belgrade has nothing to hide, it has nothing to fear from an increased international presence.
The third objective is regional security. The contact group agreed to arrange an early meeting with representatives of neighbouring countries, in particular to determine how to enhance the monitoring of their borders. After yesterday's meeting, I phoned the Prime Minister of Albania and the President of the former Yugoslav republic of Macedonia. Both expressed strong support for the contact group statement, and President Gligorov gave a warm welcome to our commitment that an international military presence must continue on the border with Serbia after the current United Nations mandate expires in August.
The Minister of State, my hon. Friend the Member for Manchester, Central (Mr. Lloyd), will tomorrow visit Tirana and Skopje as a representative of the presidency of the European Union in order to discuss what more can be done to strengthen their security.
The fourth priority of our action plan is sanctions against Belgrade. The contact group resolved to take specific sanctions to underline our condemnation of its acts of repression and to encourage it to co-operate with the action plan. We endorsed four measures for immediate action.
The measures are: a resolution in the UN Security Council for a comprehensive arms embargo against the Federal Republic of Yugoslavia, including the supply of weapons to terrorists; a refusal to supply equipment that might be used for repression or terrorism; denial of visas for senior Ministers and officials responsible for repressive action; and a moratorium on official credit for trade and investment, including privatisations, which are currently vital in maintaining the Yugoslav budget.
Five members of the contact group agreed to all those measures with immediate effect. I spoke by phone at the end of the meeting to Mr. Primakov, the Russian Foreign Minister. He agreed that Russia could support with immediate effect the arms and equipment embargo and would be willing to consider the denial of visas and the moratorium on official credit if there was no progress in Kosovo within two weeks.
We have given President Milosevic 10 days to withdraw the paramilitary forces from Kosovo and to commit himself to a process of dialogue with the leadership of the Kosovar community. If President Milosevic takes those steps, we will immediately reconsider the sanctions that we have adopted. If he fails to do so, the contact group will take further measures, including a freeze on the funds held abroad by his Government. The contact group meets again on 25 March to assess the Belgrade Government's response.
While I was in Belgrade, I also met representatives of the Serbian opposition, and gave an interview to the independent B92 broadcasting station, which has had material support from Britain. It is important that we recognise that many people in Serbia also reject the police action over the past two weeks, and want their country to accept the human rights standards of a modern European democracy.
We also want the day to come when we can welcome the Federal Republic of Yugoslavia into the family of democratic nations of Europe. We cannot do so, though,


unless Belgrade starts to behave by the standards of modern Europe. It is for President Milosevic now to decide whether the future of his state and its people will be deepening isolation from Europe or enhanced co-operation. I ask for the backing of the whole House for a firm message to President Milosevic and his Government that the essential first step must be to stop the violence now.

Mr. Michael Howard: May I thank the Foreign Secretary for making his statement, and echo on behalf of the Opposition his condemnation of the appalling violence of the past few days? We join him in condemning the continuing repression that has caused such suffering to the majority Albanian community in Kosovo.
Like the Foreign Secretary, we condemn all violence, including that of the Kosovo Liberation Army, and welcome Dr. Rugova's continued commitment to peaceful negotiation. Will wider economic sanctions, along the lines of those that were in force before the Dayton agreement was reached, follow if Serbia does not abide by the terms proposed by the contact group? Does the Foreign Secretary consider there to be a role based on the Macedonia model for United Nations monitors in Kosovo? What progress has been made in securing access to the affected area of Dreniza to allow medical and humanitarian aid to be given?
What prospects does the Foreign Secretary see for a return to the autonomy enjoyed by Kosovo before 1989? Does he agree that Kosovo's unique position makes it crucial to the stability of the region, and, given recent remarks by President Tudjman of Croatia, does he share my anxiety at reports that Serbian Croats have also been rounded up? Can he confirm recent reports that there is growing evidence of ethnic cleansing in the Sandzak area—not in Kosovo. but on the Serbian side of the border with Bosnia east of Sarajevo? Has he had reports that women and children are arriving in Tuzla, in buses, from that area?
Will the Foreign Secretary say what steps are being taken to keep the situation under review so that the suffering of the majority population in Kosovo is brought to an end, and the danger to the stability of the region is kept to a minimum?

Mr. Cook: I thank the right hon. and learned Gentleman for his support. It is welcome to be able to speak for both sides of the House when discussing an issue of such importance in international forums, and President Milosevic should not underrate the degree of unity in the western community.
It is indeed the case that we shall consider wider economic sanctions if there is no progress on the matter between now and 25 March, when the contact group meets again. We have specifically committed ourselves to examining a freeze on the assets of the Governments outside Serbia and Montenegro.
Other steps must be considered. One of the criteria by which we shall judge on 25 March whether sanctions should be further imposed is whether President Milosevic has co-operated with the action plan, a key part of which is increased monitoring throughout Kosovo, particularly in the most affected areas. That is why our statement calls for Organisation for Security and Co-operation in Europe

monitors and representatives of contact group embassies in Belgrade to be admitted to the region. I hope that we can at some stage secure a European Union presence in Kosovo, which would increase the openness of the region.
We have not at present managed to put medical and humanitarian assistance into Kosovo, which is a matter that we want to pursue in a broader dialogue with the Belgrade Government. We are pressing to put monitors in to find what can be done.
We have not had reports of an exodus from Sandzak. Our ambassador to Belgrade frequently travels throughout the Federal Republic of Yugoslavia, and was in Kosovo last week. We shall keep the situation under close review, and report to the right hon. and learned Gentleman as soon as we receive evidence of any such exodus, but he is right to say that ethnic cleansing continues throughout the former Yugoslavia.
While I was in Banja Luka, it was confirmed that a significant number of refugees from eastern Slavonia continue to arrive, where we wound up the United Nations mission on the ground that we had achieved stability and security for the minority Serb population there.
While in Sarajevo, I deeply deprecated the speech made by President Tudjman, which suggested a return to the politics of ethnic hatred and ethnic confrontation. My hon. Friend the Minister of State will visit Zagreb on his tour of the Balkan countries, and will make it plain that the way forward for the Balkans is through ethnic reconciliation, not ethnic cleansing.

Mr. John Austin: My right hon. Friend will be aware of the warm support from the Albanian and Kosovar communities in London for his swift response to and condemnation of the ethnic violence of the Serbian authorities. He referred to the actions of President Rugova, who has used every constitutional and democratic means, and has been an advocate of non-violence. Is he aware of President Rugova's intention to hold elections on 22 March? What action will the contact group take to ensure that those elections proceed peacefully, so that the democratic wishes of the Albanian majority may be determined?

Mr. Cook: I am grateful to my hon. Friend for his words about the speed with which we have responded. We have all learned lessons from the period in 1991 when the international community failed to respond with determination and speed; for that reason, we are anxious to try to ensure that we bring pressure to bear when the situation can be contained, rather than when it has deteriorated.
My hon. Friend is also absolutely right to say that Belgrade is fortunate in the leadership of the Albanian community in Kosovo. I met several of them while I was in Belgrade, and I was humbled by the moderation, reason and good sense of many of them in situations of intense provocation.
The elections on 22 March are what are termed parallel elections, which is to say that they are not official elections: we do not recognise those elections; we are turning a blind eye to those elections. While I was in Belgrade with President Milosevic, I urged him also to


turn a blind eye to such elections, in order that they may be organised and may go forward among the local people without disruption from Belgrade.

Mr. Menzies Campbell: May I from these Benches support the right hon. Gentleman's determination to send a firm message to President Milosevic? However, does he agree that, in spite of his best efforts, there is unwelcome gap between the legitimate and robust language of condemnation used by himself and Madeleine Albright at the weekend and the measures adopted so far by the contact group?
Does the right hon. Gentleman further agree that it would be unfortunate in the extreme if we were to allow the achievements in Bosnia over the past two years to be undermined in any way by instability in the region? Has NATO made any assessment of the consequences for Bosnia if there is continuing unrest in Kosovo? Has NATO made any assessment of the steps it might take, if invited by the UN, to assist in the restoration of order in Kosovo?

Mr. Cook: I met the Secretary-General of NATO, Javier Solana, yesterday, and discussed the situation with him. However, at a time when we are trying to de-escalate the violence and promote peaceful political dialogue, it may not be helpful to escalate what consequences may be necessary some way down the track, if the situation were to deteriorate. We are all focusing now on finding a diplomatic and political solution. If NATO has a role to play, it may well be in the follow-on force in the former Yugoslav republic of Macedonia, when the UN mandate expires in August. That is currently the only military commitment that might be in contemplation.
The hon. and learned Gentleman pointed to a gap between rhetoric and action. I should be the first to say that it is important that we are not complacent about how much has been achieved; indeed, the situation in Kosovo remains as disturbing as it was when we called the contact group.
One of the tragedies of the events of the past two weeks is that their legacy will make it more difficult to achieve the reconciliation which is our objective. However, in the 10 points of the action plan, the four points of sanctions are a robust response—much more robust than the response of the international community in the early days of the collapse of Yugoslavia, and possibly a more robust response than I would have been prepared to put money on before we had the meeting on Monday.
That meeting was five hours of intense talks, which produced substantial support, not only for robust rhetoric, but for a clear statement of our resolve expressed through specific action. I urge hon. Members not to underrate the extent to which that will increase pressure on Milosevic, especially if he is unable to finance future privatisations.

Mr. John Home Robertson: As one of the many people who took part in relief work in Bosnia and who witnessed scenes that were a disgrace to European civilisation during four dreadful years, before NATO took a grip on the situation in that country, I urge my right hon. Friend not to allow time for any further atrocities to take place in Kosovo. Can we depend on him

to insist on firm, urgent and resolute action, and, if necessary, intervention by the European members of NATO?

Mr. Cook: As I said in answer to the previous question, any question of military intervention has not been contemplated, and is not on the agenda. We seek to ensure that we achieve progress that averts the need for military intervention. Nor would such military intervention, if it were to happen, have a simple or uncomplicated impact on the region as a whole. It is much better that we make progress on the strategy that has been adopted by the contact group, but I agree with my hon. Friend: if we had intervened earlier in the conflict in Bosnia, we might not now be dug in for several years' presence, putting together a country that we allowed to fall apart.

Mr. Eric Pickles: Does the Foreign Secretary agree that the methods used by the security forces bear a sad resemblance to things that we have seen before? However, does he agree that perhaps one significant difference is that the war crimes tribunal is now well established? There was much cynicism about it 18 months or a year ago, but there can be no doubt about how effective it is going to be. Does he believe that a clear message must go out that, no matter how high or how low a person is in a particular country, people who have committed or ordered these atrocities will eventually face justice?

Mr. Cook: I am delighted to agree entirely with the hon. Gentleman. At Dayton, President Milosevic signed up to an obligation to co-operate with the International Court in The Hague. Its writ runs throughout the whole of former Yugoslavia, including Kosovo. There is therefore nothing to prevent the court from seeking to indict people who it believes may have committed an offence under its terms.
The hon. Gentleman is right to say that we have managed to make serious progress at The Hague. One third of the people who have been indicted by the prosecutor have been arrested and brought for trial at The Hague. That is more progress than we could have dared hope for a year ago, and I echo his words. People who remain indicted and have not yet been brought to justice should consider surrendering themselves, because there is no hiding place in the international community for those who break the law of that community.

Mr. Tam Dalyell: Is the Foreign Secretary aware that even those among us who are most cautious about military intervention must recognise the appalling complexity and, indeed, peril of the situation that we have to face? In the light of the Minister of State's visit to Skopje, I recall that, two years ago, when the all-party arts and heritage group went to Thessalonika, we were harangued on the issue of greater Macedonia. What will be said about the Macedonia position? Are we talking to the Government of Greece, a European partner, which has an immediate stake in this, and what is it saying?

Mr. Cook: My hon. Friend raises a point that is an important part of the complexity of the situation, which is why I keep using the tortuous mouthful, "the former Yugoslav republic of Macedonia"; if I did not, I would receive a letter from the Greek ambassador, so I am very


happy to stick to the terms of that agreement. I am pleased to say that, over the past year, relations between Greece and the former Yugoslav republic of Macedonia have considerably improved. They would be at one on the issue of ensuring that instability in Kosovo does not spill over the border.
My colleague the Foreign Secretary of Greece was in Belgrade. I will meet him on Friday when he attends the meeting of European Union Foreign Ministers in Edinburgh, and I am arranging to have a bilateral with him to discuss the position. In the meantime, I seize with delight the opportunity for my hon. Friend and me to bat on the same side again.

Mr. Martin Bell: Is the Foreign Secretary aware of the effect of broader sanctions on the Serbs last time, which was to reward the black marketeers and racketeers and to punish and sometimes to kill the poor, the sick, the weak and the old? Can we be very careful before going down that road again?

Mr. Cook: The hon. Gentleman's words are wise and fair. It is not just the ordinary people of Serbia but Serbia's neighbouring countries who have concern on that matter. We have received representations from one or two of them expressing their deep concern that the effect of sanctions was to promote smuggling and black marketeering in their countries. That is a down side that must be fairly reflected in any decision that we make.
We must seek to impose sanctions that do not hit the poorest but hit the elite to whom we are trying to get the message across. That is why the initial list includes an arms embargo, a denial of visas to top people and the withdrawal of credit for the financing of privatisations. That is crucial to the Government of Yugoslavia, but is not so important to the daily shopping list of its people.

Mr. Andrew Tyrie: Further to the earlier remarks about the Macedonian problem, does the Foreign Secretary agree that the key task now from the west's perspective is to stop the spread of this conflict throughout the region, and that Macedonia is the linchpin in that task? Does he think that 700 front-line troops—the UN troops at present in Macedonia—are remotely enough to protect Macedonia from the spread of the conflict? Does he support the urgent request that President Gligorov has often made in public and in private that the UN presence be replaced by more sizeable NATO forces at the key strategic points on the frontier with Kosovo?

Mr. Cook: There may be only 700 troops and they may therefore be of limited immediate military effect on a very difficult border, but they are overwhelmingly American troops, and that immensely concentrates the minds of Belgrade if they ever think of doing anything on that border.
I spoke to President Gligorov yesterday after the contact group meeting. I am pleased to say that he said several times that the result was a good one. He was particularly pleased that we had obtained a commitment to a follow-on force after August. For the first time, Russia raised no objection to that. In the current state of Kosovo, that is an important step forward. Precisely what

that follow-on force might be has yet to be resolved, but we now have strong international commitment to making sure that it continues.

Mr. Douglas Hogg: Does the right hon. Gentleman accept that the main objective of policy, at least for the present, must be to re-establish the autonomous status that Kosovo enjoyed before 1989? Will he take every opportunity in his discussions with Dr. Rugova and others to stress that the separatist solution would not receive the backing of the western community, and that the western community would not support an independent state of Kosovo or any union between Kosovo and the adjoining states, other than, of course, Serbia?

Mr. Cook: I agree with the right hon. and learned Gentleman that there is no map for a greater Croatia or a greater Serbia, and equally there must be no map for a greater Albania. We said in the statement of the contact group yesterday, and I repeated in my statement this afternoon, that it was not our position to support an independent Kosovo. Of course, if Belgrade does not respond to the legitimate political demands of the people of Kosovo—for instance, to have control over their own education and to be taught in their own language—that will fuel demands for independence.
The right hon. and learned Gentleman mentioned restoration of the pre-1989 autonomy. When I discussed that with some of the younger Albanians from Kosovo, they said that, while that would be welcome, for it to work there would need to be changes within Serbia. A successful solution to the crisis does not simply require greater autonomy for Kosovo. It also requires more freedom of expression, more pluralism, more democracy and more participation of the people within Serbia in the political process.

Mr. John Randall: I thank the Foreign Secretary for speaking to the independent radio station B92, as I have been involved with its efforts to maintain independence during the period of repression. While I in no way condone the actions of the Serbs, I urge that we remember the importance to the Serbian national identity of the whole region of Kosovo. The battle of Kosovo is as important to Serbian history as Magna Carta is to England.

Mr. Cook: Yes, I have had that view expressed to me several times in Belgrade. The battle was fought in 1389: the Serbs lost. The case was made to me by President Milosevic that Kosovo was the spiritual home of the Serb kings. I respect people's identity with their cultural history—it should be handled with dignity—but that is a difficult basis on which to found a territorial claim so many hundreds of years later.
When I was interviewed by the people at B92, I was impressed by the fact that they were as lively, cosmopolitan and pluralist in outlook as young people in any other country of Europe. In that generation there is hope for the future of Serbia and the Balkans—but they must be given the opportunity to express themselves.
This week, the Belgrade Government make an important series of decisions about the awarding of radio frequencies for the independent stations. I very much


hope, particularly at this moment in history, that they will not close down any of the independent stations by denying them a frequency.

Dr. Julian Lewis: The Foreign Secretary has referred to mistakes made in the past. I welcome the broad thrust of his remarks this afternoon, but does he agree that one mistake made by politicians on both sides of the House and by certain parts of the Foreign Office in the past was to regard President Milosevic as a moderating force on the excesses of the Bosnian Serbs? Does the right hon. Gentleman agree that, far from being a moderating force, he was an instigator of those excesses? Would he further agree that it is unwise to say "never" to the use of force, because, if the atrocities get worse, force will have to be used?

Mr. Cook: I know that the hon. Gentleman's wing of his party does not regard the Foreign Office as really having been a part of the previous Government—but I am afraid that it was. If errors were made last time, they are errors for which Ministers in power at the time must accept responsibility.

Mr. John Wilkinson: The Foreign Secretary is to be commended on his prompt response in going in person to Belgrade to confront the malign reality in power there. Can he state unequivocally that, for a settlement to endure, it will ultimately have to be based on the fundamental democratic principle of self-determination for the people of Kosovo?
Is it not that principle which distinguishes our system in the free part of Europe from what has existed in the Republic of Yugoslavia in the past, be it under communism or under the rump that remains? Can he assure the House that he will keep together the contact group—not least the Americans, who should maintain a military presence in whatever force is located in Macedonia in the medium and longer term?

Mr. Cook: The hon. Gentleman is absolutely right: it is important to maintain unity, and we shall work hard to do so. I felt that yesterday's discussions, particularly my phone call with Foreign Minister Primakov, demonstrated the extent to which peer group pressure now produces a much more common front among nations in the international community. I am pleased that we managed to achieve that much agreement.
The hon. Gentleman is also right to say that there is a long way to go; we must watch the situation with the greatest of care. I assure the House and the hon. Gentleman that we will do so.

Adoption and Fostering

Mr. Julian Brazier: I beg to move,
That leave be given to bring in a Bill to require local authorities, when considering adoption or fostering, to make use of married couples unless they can show that no such couples are available who meet the needs of the child; and for connected purposes.
I am grateful to Members of all parties who have agreed to co-sponsor my Bill.
We have a special responsibility to unwanted children. Not only do they have no voice of their own, but it is very sad that any child should be without a loving home. We all read from time to time, with a shudder, of young lives that have been ruined by physical and sexual abuse, drug taking or child prostitution. We are failing the most vulnerable and defenceless members of our community.
Perhaps the worst features are the horrendous statistics associated with children in care—the very children whom the state has taken as its own responsibility. The occasional inquiries into the torture and abuse of children in some children's homes represent only a small part of the total picture. We know, of course, that there are many workers in children's homes who struggle to provide a decent life for some very difficult and damaged children, but the overall statistics for children leaving care are terrible.
A child leaving care is 50 times as likely as a typical youngster of the same age to end up in prison, and far more likely to become a drug addict. Perhaps most shocking is the fact that a quarter of all the girls who have been in care became pregnant while they were in care, and one in seven are pregnant at the point of leaving care. The abuse among boys is at much the same level.
Those evils are passed on to the next generation. We remember the tragic case of Rikki Neave, the six-year-old who was repeatedly beaten, tortured and finally choked to death by his natural mother, herself a graduate of our so-called system of care.
Yet there is one highly underrated institution that serves so many of those children so well: adoption. Studies from the United States, Australia, New Zealand and this country have shown the astonishing success of adoption. Adopted children not only do much better than those in care, which is perhaps to be expected because some of the most damaged children must be kept in care, as no one wants to adopt them; children adopted from care also do very much better than those children from care who are returned to their natural parents.
Perhaps most surprising of all, the studies show that damaged children adopted from care by married couples do better on average than children who have never been in care, who are raised in certain categories of natural family, including those raised in single-parent families headed by a young, never-married mother.
However, adoption has collapsed numerically. From 21,000 adoptions 20 years ago, the figure was down to less than 6,000 last year. I draw the attention of the House to three features of current adoption practice, besides the dramatic fall in the absolute numbers.
First, while most adoptions are still with married couples, there is a growing tendency for some local authorities to place children with individuals who are in other forms of union. There was the celebrated case last


year, for example, of the 11-year-old boy whom Southwark sought to place with a homosexual who was in a supposedly stable relationship with another man. What was Southwark trying to achieve?
I believe that we should be tolerant towards adult unions of all sorts, where only adults are concerned, but a child of 11 does not have the mature sexuality that would allow it to make a free choice as to the sort of sexual relationship in which it wants its minders to be involved. Indeed, I do not know whether the child in that case tried to make such a choice. Children must not be allowed to become the pawns of some social workers in the battle that they are fighting for their own social and political agenda.
The institution of marriage, even in this era of divorce, is still an astonishing success. A child born to a married couple has a better than four in five chance that 10 years later its parents will still be together. On the other hand, according to the latest British household panel survey, a child born to a couple who are not married but in an allegedly stable relationship has only a one in five chance of his parents remaining together for 10 years—unless they subsequently marry.
So many married couples who are unable to have their own children would dearly love the opportunity to adopt a child and, in some cases, are willing to adopt very damaged children from the care system. It is sad to hear that such couples are often denied that opportunity. In one case, a mixed race couple were denied the opportunity to adopt a coloured child because social services in the authority concerned considered that they had suffered insufficient racial harassment to provide a good home for the child. What nonsense.
Alongside the practice of placing some children with unmarried individuals in other relationships and imposing unfair restrictions on some married couples who would dearly love to adopt, there is a third feature of adoption that I believe has been insufficiently examined: the financial risk to a family who take on a severely emotionally damaged child from care. I am at present dealing with a constituency case involving a married couple who adopted two girls who had been severely sexually abused. One of the adoptions succeeded, but, sadly, after a long struggle, the couple were forced to relinquish the other girl back into care.
At the time of adoption, the parents were forced to take on the full legal responsibilities that natural parents would assume. That is fair enough when a child is adopted at birth. However, the social services department is pursuing this couple for an enormous bill for the care of the second child, even though the couple have provided a good home for one child and struggled very hard with the other. That hardly seems just.
That brings me to the specific proposals in my Bill. First, local authorities should be required to consider adoption for all children who have been taken into care as a result of being severely physically or sexually abused, putting the interests of the child, not the natural parents, first. Secondly, wherever possible, adoption should be granted to married couples unless it can be shown that no suitable married couple are available.
Thirdly, when adoption is not an option—probably because a child is so damaged that no one can be found to take him on—the alternative should be fostering by a married couple. I do not deny the splendid work done by

some individual carers. However, where possible, it is best that fostering should be undertaken by married couples, for the reasons I have outlined.
Fourthly, when children are adopted out of care, the authority should have to sign a financial waiver so that, if an adoption fails and the child returns to care, the parents are not put at financial risk. Finally, the Bill seeks to give the Secretary of State the power to intervene when a local authority fails to follow those rules, and to give that authority's control over adoption to a voluntary agency.
In our country today—

Madam Speaker: Order. The hon. Gentleman's 10 minutes have expired. I understand that there is opposition to the Bill.

Mr. Hilton Dawson: In rising to speak against the Bill, I sincerely congratulate the hon. Member for Canterbury (Mr. Brazier) on at least raising in the House the tremendously important subject of fostering and adoption. I come from a professional background of managing fostering and adoption, and have great sympathy with the hon. Gentleman's genuine, obvious desire to ensure that children in care are given the security, consistency, respect, consideration, guidance and all-round care they need.
I would counsel the hon. Gentleman to reflect on the fact that adoption is not a panacea. It is an over-simplification to say that it can be a solution for all children who have been abused and then come into care. Nor is fostering as an alternative to adoption invariably better than residential care. Many young people, particularly adolescents, make a positive choice for residential care rather than go back into a family.
No adult has a right to be a foster carer or adopter, but, like the hon. Gentleman, I want children in care to be offered excellent placements where they can have good experience of family life that meets their needs and helps them to prepare for the future. I just do not think that the hon. Gentleman's Bill is the way to do it, because, despite what it says, it would run the risk of undoing the Children Act 1989 principle—the good social work practice principle—that the needs of children are paramount. The very act of requiring local authorities to show that no married couples are available who could meet needs means that some aspects of real needs could be compromised to avoid criticism.
Matching children with foster carers or adopters is an extremely complex task, wherein all the growing and developing needs of children from a vast variety of backgrounds, who have often been abused, rejected and neglected, must be matched carefully to the assessed abilities and qualities of prospective carers. It is not an exact science—far from it. It is a matter of delicate and subtle judgment. At its heart, it is about working with human relationships.
In assessing foster carers, it is, of course, vital to gauge the quality and commitment of people's personal relationships, but it seems inappropriate to elevate a couple's marital status so that it could begin to be more important than factors such as whether the prospective carers really have the skills to work with children who have been sexually abused; whether they have the ability to work with birth families; and whether they share a


cultural background, which is important, or can tolerate extreme acting-out behaviour. Social work is extremely sensitive, acute—sometimes intuitive—work that does not always fit comfortably within the bureaucracy of local authorities. The Bill would establish another unhelpful rule.
Children in care need flexibility and tolerance. They need to have their views heeded, and sometimes they need very caring people to be prepared to take risks. They do not need the imposition of moral imperatives that are nothing to do with keeping them safe or meeting their individual needs.
In this day and age—let us face it—one does not have to be married, or even be in a relationship, to provide excellent care for children. Indeed, there is evidence that, in some circumstances, one group of much-maligned potential carers—single parents—can have more to offer than couples. Crucially, it may be easier for a child, especially one from a disturbed background, to attach to one new adult rather than two.
Research carried out by Dr. Morag Owen from the university of Sussex and published by the British Agencies for Adoption and Fostering, considered the experience of 48 children who had been adopted by single people. Some of the children felt that it was an advantage to have one parent: the views of two adults did not have to be reconciled, and there was real consistency. Girls who had been sexually abused valued the opportunity to have a one-to-one relationship with a caring woman. The study concluded that, given the needs of children in the care system, single people are often uniquely equipped to parent them.
However, single people are often deterred from coming forward for assessment as foster carers or prospective adopters. We need more placements, particularly for older children with more complex needs and challenging problems. But giving priority to married couples could well mean that even fewer single parents or couples living together would present themselves for what should in any case be the challenging and rigorous process of assessment.
I am concerned about the Bill. It is highly unlikely that it will become law, but were it to do so, it could undermine the chances of some of the most needy children in our society to have a decent childhood. I do not intend to take up the time of the House by pressing the matter to a Division, but I hope that the hon. Gentleman will reflect upon what I have said, and decide not to proceed with the Bill.
A Bill which celebrated the rich variety of adoptive and foster placements in Britain, which promoted adoption and fostering as some of the most profoundly important tasks which all sorts of adults in all sorts of relationships and none can undertake, and which offered better training, support and recognition, would be a much better Bill, and that would have my whole-hearted support.

Question put, pursuant to Standing Order No. 23 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business), and agreed to.

Bill ordered to be brought in by Mr. Julian Brazier, Sir Peter Lloyd, Mr. Elfyn Llwyd, Mr. Lawrence Cunliffe, Mr. Andrew Rowe, Mr. Tom Cox, Sir Teddy Taylor, Mrs. Ann Winterton, Mrs. Marion Roe, Mr. John Burnett, Mr. Peter Bottomley and Rev. Martin Smyth.

ADOPTION AND FOSTERING

Mr. Julian Brazier accordingly presented a Bill to require local authorities, when considering adoption or fostering, to make use of married couples unless they can show that no such couples are available who meet the needs of the child; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 27 March, and to be printed [Bill 141].

Ministerial Correspondence

Mr. Jonathan Sayeed: On a point of order, Madam Speaker. I have a letter in my hand purportedly from the Minister for Local Government and Housing. It is not addressed in the form that is customary in this place, it is not signed and, although I wrote on 14 January, I did not receive a reply until 9 March. Would you agree that such conduct is discourteous, and if Ministers demonstrate by their actions a belief that Parliament no longer matters, it is not surprising that the BBC follows suit?

Madam Speaker: I refer the hon. Gentleman to an exchange which took place on various points of order last Thursday, when the Leader of the House was in her place. The right hon. Lady answered questions at the Dispatch Box only yesterday, and she will not be doing so again until 6 April. I suggest that the hon. Gentleman forms a question for the Leader of the House, setting out the matter and asking for reasons for the delay and the lack of signature. In the meantime, no doubt Ministers concerned will report the matter to the appropriate place.

Opposition Day

[9TH ALLOTTED DAY]

Taxation

Madam Speaker: I have selected the amendment in the name of the Prime Minister.

Mr. Peter Lilley: I beg to move,
That this House deplores the fact that the Government broke its pledge not to raise taxes by raising 17 taxes in its first Budget; notes that, although the full impact of many of these taxes, such as the Pensions Tax and higher business taxes, was not immediately apparent to the public, these taxes will undermine Britain's economic success and people's retirement incomes in the long term; and urges the Government not to introduce any further hidden taxes in the forthcoming Budget.
With the Budget only a week away, I am sure that the House will not expect Ministers to give us details of their tax plans today. Hon. Members are becoming used to the fact that the House is the last to be informed of any Government policy. But we expect Ministers to answer for the hidden taxes that the Government have introduced so far—hidden taxes on pension funds, savings and business, not to mention extra taxes on motorists, students, smokers and home owners.
Before the last election, Labour had to convince a sceptical electorate that it had changed. It said that it was no longer the party of tax and spend. It claimed to have undergone a conversion, so it invoked biblical language to persuade people that it was genuine. The Prime Minister, in messianic mode, told his conference:
I vow that promises we make on tax, we will keep. This is my covenant with the British people. Judge me upon it.
New Labour, Old Testament. When the Prime Minister said,
We will not increase taxes at all",
people believed him. The Chancellor of the Exchequer took a high moral tone. He said:
We will not make promises we will later break, we will not say one thing before the election and another after. Above all, we will be straight with the British people about tax.

The Chief Secretary to the Treasury (Mr. Alistair Darling): Does the right hon. Gentleman agree that the promise we made was that we would not increase the top or basic rate of income tax?

Mr. Lilley: I was quoting the Prime Minister, then Leader of the Opposition. According to a report in the Financial Times on 21 September 1997, the right hon. Gentleman said at a meeting in Birmingham a few months before the election:
We have no plans to increase tax at all.

If the Chief Secretary wishes to dissociate himself from the Prime Minister, he should have done so before the election, not afterwards.
As I was saying, the Chancellor also took a high moral tone. He said:
We will not make promises we will later break, we will not say one thing before the election and another after. Above all, we will be straight with the British people about tax. That is why at the General Election we will spell out quite clearly our tax plans, so the British people know what we intend to do. There will be no lies, no deceit.
When he said,
Apart from the Windfall Tax, Labour's plans do not require any extra taxes",
people felt that they could believe him. They did not realise that the Chancellor intended to impose hidden taxes—taxes that he had hidden from the voters before the election and which he hoped would be largely invisible after their implementation.

Dr. George Turner: The right hon. Gentleman says that the Labour party said that it would spell out to the electorate what its tax promises were. As a candidate I know that they were explained in the manifesto on which I fought and won my seat. Can he cite a single promise from that manifesto—not from newspaper reports or cuttings—that the Government have broken?

Mr. Lilley: I was quoting from a speech by the Chancellor given just before last year's Budget—I will be addressing the same audience tomorrow. He said that he would spell out clearly the Government's tax plans so that the British people would know what they were. When did he spell out clearly to people with pensions that he planned a £5 billion annual tax on their pension funds? When did he spell out to business men that he planned £22 billion of extra taxes on the corporate sector? When did he spell out to savers that he would impose the savings tax that we debated last week?

Mr. Ivor Caplin: Will the right hon. Gentleman give way?

Mr. Lilley: No, I will get on because I have many questions to which the Chief Secretary may wish to reply.
When did the Chancellor spell out to home owners that he would tax their mortgages by cutting relief even while interest rates were rising? When did he spell out to students that he would impose a pay-as-you-learn tax on higher education? When did he spell out clearly to motorists, especially rural motorists, that he would raise extra taxes on petrol?
Those are the questions that the Chief Secretary must answer today. The Government think that they can get away with deceiving the British people, betraying their pledges and concealing the cost. The cost will come through and then the facts will be clear. They will not get away with it: the facts will not let them; we will not let them; and the British people will not let them.

Mr. Darling: The right hon. Gentleman will find a clear reference in our manifesto to the fact that we intended to review corporation tax. And does he accept


that the previous Government, of which he was a member, were committed to a real increase in road fuel duties every year?

Mr. Lilley: During the election campaign, I warned people with pensions that Labour might be planning to abolish tax credits, and that that would hit them. The Times reported the then shadow Chief Secretary as saying:
there was no basis for the Tories' claims. They were desperate talk intended to frighten.
I will give way to the Chief Secretary if he wishes to explain that. Since the election, the Chancellor has dropped the Chief Secretary from his circulation list—what a shame that the Chancellor did not send him his "no lies, no deceit" speech about taxes before the election.
Labour thought that people would not understand the changes that it was making to taxes on dividends. Labour hoped that people would not recognise that money was being siphoned out of their pension funds until they retired and found that their pensions were smaller than they expected or, if they had already retired, until they found that their pensions did not rise as much as they hoped. The last person who thought he could get away with robbing pensions was another Labour Member of Parliament and business colleague of some absent Treasury Ministers, Robert Maxwell—the original bouncing Czech. That is why I dubbed the July Budget the Robert Maxwell memorial Budget at the time.
The Chancellor cannot claim that this back-door tax was foisted on gullible new Ministers by Treasury officials. All the evidence suggests that it was cooked up in opposition. It was concealed from the electorate—and even civil servants were not consulted until the last minute. That is why the tax has stumbled like a drunken man from one change to the next. The Paymaster General was supposed to have brought his immense business expertise to bear on it. All 1 can say is that if this is the best example of his work, he is not worth the money he is not paid.

Ms Ruth Kelly: Does the right hon. Gentleman agree that tax credits on pension funds were a gross distortion of the tax system? Will his party reinstate those tax credits if it returns to power?

Mr. Lilley: Of course I do not accept that the credits were a distortion. On the contrary, the imputation tax system was the least distorting form of tax. I am glad that the hon. Lady accepts that we will form the next Government. I cannot tell her how many of the Labour party's messes we will restore because I fear that there will be many more on top of this.

Mr. Caplin: Does the right hon. Gentleman accept that the UK has the lowest rates of corporation tax?

Mr. Lilley: The changes introduced by the Government reduce the rate but increase the tax take by £8 billion during this Parliament. We reduced the burden of tax on business, and my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) can vouch for that.

Mr. Jonathan Sayeed: Will my right hon. Friend confirm that, if a company issues a false prospectus and its directors ask for support on the basis of promises that they have no intention of keeping, those directors go to gaol? What does he think should happen to the Labour party, which asked for, and got, the support of the people on the basis of false promises?

Mr. Lilley: In politics, the penalty is usually inflicted by the electorate—as we ourselves have been known to find out.
What is particularly appalling about Labour's pensions tax is that it threatens a great Conservative success. We encouraged people to build up personal and occupational pension funds. As a result, Britain has more money invested to pay for future pensions, not just than any other country in Europe but than all the other countries in the European Union put together. It is criminal to put that at risk, as this tax does.
Faced with the charge that the tax was being levied at the expense of pensioners, the Government have come up with the most preposterous defence. They claim that the tax is unique. It might raise £5 billion at the expense of pension funds, but the Financial Secretary said that that would be good for pensions, good for pension funds and good for pensioners. In short, she thinks that taxation is good for people—except for the Paymaster General, for whom it is too good. [HON. MEMBERS: "Where is he?"] He is probably in Guernsey.
The Chancellor flatly denied that the pensions tax would have an impact on the value of pensions, but the Government Actuary said otherwise. He concluded:
The tax changes resulting from the July 1997 budget … potentially affect all forms of contracted-out pension funds.
He calculated that pension contributions need to go up by some 12 per cent. For most members of pension schemes, that is equivalent to more than 1 p on their income tax. Labour raises taxes whereas we cut them.

Mr. Steve Webb: Will the right hon. Gentleman confirm that he was a member of the Cabinet when Mr. Lamont first cut the tax credit on dividends and raised £1 billion by doing so?

Mr. Lilley: Surely the hon. Gentleman recognises that the then Chancellor introduced a target 20p rate of tax and aligned the tax credit with it at that time.
The pension tax will come through gradually, but the extra petrol tax was slipped in overnight. By introducing an extra rise in July, slapping on 4p per litre and accelerating future increases, the Chancellor pocketed a cool £730 million of extra tax. If he jacks up petrol taxes yet again next week, there will have been three such new tax rises in 16 months.
Many people have no choice but to pay that extra tax. For most people in rural areas, driving is a necessity, not a luxury. The trouble is that the Government simply do not understand the countryside. They do not care about people who live in rural areas and they do not realise that they need to be able to plan for the future. If the Chancellor wants to regain respect for his party in the countryside, he should drop his plans for yet another petrol tax hike next week.

Mr. Geraint Davies: Will the right hon. Gentleman give way?

Mr. Lilley: No, I wish to make progress.
We must hope that the Chancellor makes a better fist of next week's Budget than he did of last July's. As millions of mortgage holders and business men have been finding out, that Budget was seriously misjudged. In his Budget speech, the Chancellor argued that higher taxes were needed to cool consumer spending. Then, far from taxing consumers and spending, he piled the bulk of his extra taxes on business and savings: £22 billion of extra tax on the corporate sector over the course of this Parliament; taxes on pensions; and taxes on PEPs and TESSAs. Despite his own arguments, he left consumers largely unchecked and the Bank of England has been raising interest rates every since.
Businesses have had the worst of both worlds: higher taxes and higher interest rates, leading to an overvalued pound, clobbering exports, hitting manufacturing, and putting jobs at risk. Does not the Chancellor realise that taking £22 billion from industry leaves it with that much less to invest and create jobs? Do not Labour Members realize—they must see evidence of it in their constituencies—that the Chancellor has brought manufacturing industry to the brink of recession? They may not be able to see that, but we can. Labour is bad for business and we shall defend business against Labour's tax rises.
The Chancellor cannot claim that he opened the books and found that he needed all that extra tax—so much that he had to break his solemn pre-election pledges. On the contrary, he opened the books and found that we had left him with a golden economic legacy. The Budget deficit is falling even faster than my right hon. and learned Friend the Member for Rushcliffe forecast in his last Budget. That should mean that borrowing can be eliminated with less of a rise in the tax burden than anticipated, but instead the Chancellor has been deliberately adding to it.
According to the Government's own figures, the Chancellor now plans, by the turn of the century, to take nearly 3 per cent. more of national income in taxes than in the last year of the Conservative Government. That is equivalent to nearly 10 extra days of tax paying in the course of the year. In the last year of the Conservative Government, taxpayers had to work from 1 January to 10 May to pay off their dues to the state—10 May was tax freedom day. Thereafter, every penny that they earned was their own to spend, give, save or invest as they chose, but under the Labour Government, people will have to work until 20 May to clear their taxes. They will have to do 10 more days of hard labour. That is the price of Labour's plans.
Labour Members cannot claim that it does not matter because the bulk of the taxes fall on businesses, not individuals. All taxes are paid by ordinary people, through higher bills, lower pensions or less take-home pay. As Professor John Kay, a new Labour business guru, says:
There is no such thing as a tax on firms: the effective incidence of all taxes is ultimately on individuals.

All taxes fall on individuals, but not all individuals pay taxes—indeed, not all Treasury Ministers pay taxes, or not as much as they should, according to the Chancellor, who said:
It cannot be right that the decent hard-working majority, paying their share of tax, should watch a minority abusing the system, using scams, loopholes and dodges; distortions in the tax system which must be eliminated.

Mr. Simon Burns: Where is the Paymaster General?

Mr. Lilley: In Guernsey.
It is true that on Friday the Treasury announced that it was cracking down on offshore trusts. It said that a tax loophole would be closed to prevent wealthy individuals from bringing their trusts onshore to avoid capital gains tax. That is all well and good, but the new policy fails the Robinson test: it leaves the Paymaster General in the clear. He is still a tax-free zone. While the rest of us have to work for an extra 10 days a year to finance the Government, he keeps his £12 million offshore to finance his retirement. It seems that the only tax that the Chancellor will not raise is a tax on his hon. Friend the Paymaster General.
In his pre-Budget report, the Chancellor reaffirmed his promise to introduce a 10p starting rate of income tax. We now learn from the newspapers that he may defer it—how typical of Labour. The Government drive ahead with raising taxes in defiance of their pledges, but hold back on the one tax cut that they promised.
Let there be no doubt where we stand on a lop tax rate. Any reduction in tax is welcome, especially after the hidden tax rises that we have had from the Government so far. We shall hold the Chancellor to all his promises on the 10p rate. Does he recall his pre-election pledge, when he said:
We would ensure that all lower and middle-income families receive the full benefit of the tax cut"?
Will he guarantee that he will not claw back the benefit of the 10p rate from basic rate taxpayers by starting the basic rate at a lower rate of income or by cutting allowances? It is bad enough that the Chancellor has broken his promise not to raise taxes; it would be a disgrace if he did not carry out one of his few tax-cutting commitments in full.
The Government were elected on the basis of the most solemn pledges—

Mr. Darling: The right hon. Gentleman is urging my right hon. Friend the Chancellor to reduce the starting rate of income tax to 10p, but in today's Financial Times he said that he was against that measure.

Mr. Lilley: I certainly did not. On the contrary, I said in the document reported in the Financial Times that we would support the reduction but that we thought that the Government would introduce it in a way that merely clawed back higher up the income scale and, that in that case, it would not be a genuine tax cut. That is the point that I have been making while the right hon. Gentleman has not been listening. The right hon. Gentleman should get his interventions right and ensure that he is on sounder ground than he has been so far.
The Government were elected on the basis of the most solemn pledges not to raise taxes, but they say one thing and do another. Before the election, the Chancellor said that he wanted to encourage investment, yet he is siphoning £5


billion a year from Britain's biggest source of investment capital. The Prime Minister said that he wanted pensioners to be cherished and valued to the end of their days. If so, why is he plundering their pension schemes? So much for the giving age; it is more like the give and take age: they take and we give.

Mr. Geoffrey Clifton-Brown: Is it not precisely those people on low income who will be hit by the changes in advance corporation tax credits? Their pensions will be lower and their savings in the form of PEPs and TESSAs, on which they were relying for their old age, will be less, so they will become a greater burden on the state.

Mr. Lilley: My hon. Friend makes a good point. The Government have actually reduced the reliefs available to low-income savers and reduced the system that we set up so that it is attractive only to upper rate income tax payers.
The one thing of which we can be sure is that Labour Budgets mean higher taxes. When the former right hon. and learned Member for Putney, David Mellor, said that
dogs bark, cats miaow and Labour puts up taxes",
he did not just mean old Labour. Old Labour was honest about raising taxes. New Labour introduces hidden taxes. Old Labour taxed wealth. New Labour taxes by stealth, and it is a racing certainty that there will be more taxes in the next Budget.
In just 10 months we have had a pensions tax, a savings tax, a student tax, more business tax, higher petrol tax, higher tobacco tax, higher mortgage tax and the highest ever council tax. The Government have broken their promises, abandoned their vows and cast aside their covenants, but they cannot escape the judgment of the British people. Labour cannot be trusted on taxes.

The Chief Secretary to the Treasury (Mr. Alistair Darling): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
commends the Government for honouring its election promises not to increase the top or basic rate of income tax, to reduce VAT on domestic fuel to five per cent. and to introduce the levy on the windfall profits of the privatised utilities; approves the Government's determination to put in place a fair tax system, to encourage investment and long-term sustainable growth; believes that Britain's interests lie in the pursuit of sound economic policies that will benefit the many and not just the few, and which are in the long-term interests of the whole country; and urges the Government to reject any return to the boom and bust policies of the past which resulted in the 22 tax rises imposed by the previous administration.".
As regards the judgment of the British people, within recent memory the British people have shown which party they trust to form the Government of this country.
The Labour Government are delighted to be having this debate, even if to a large—

Mr. Lilley: Will the right hon. Gentleman give way?

Mr. Darling: I shall certainly give way a little later.
The Labour Government are delighted to be having this debate, even if it is, to a large extent, a re-run of the general election. That is not surprising because, in many ways, the

Conservative party has still not come to terms with its defeat. It cannot accept that it lost the last election because it lost the trust of the country. No one believed the Conservatives then, and no one believes them now: nothing has changed.
I shall demonstrate that proposition by looking at two winning manifestos. No doubt Conservatives will remember the first one—

Mr. Lilley: rose—

Mr. Darling: I shall give way because I wonder whether the right hon. Gentleman remembers what was in the Tory manifesto of 1992. It said that the Conservative party wanted to continue to reduce taxes as fast as it could. But during the last Government's term of office a typical family—this afternoon Conservative Members have been professing concern about families and people on lower incomes—paid an extra £2,000 in tax. How does the right hon. Gentleman justify that?

Mr. Lilley: Is the right hon. Gentleman going to apologise to the British people for what he said before the election, which has been rebutted and refuted since?

Mr. Darling: I shall come to our manifesto in just a minute.
The Conservatives fought the 1992 election explicitly on tax, and they won. We all remember the pollsters and the so-called double whammy. The Conservatives won the election because they fought it on tax; indeed, they tried to fight the last election in 1997 on exactly the same grounds, but they failed because they had been condemned by their very own actions.
We also remember the then Prime Minister saying in March 1992:
Low tax opens doors…High tax slams the doors on the hopes that are common to all.
There have been a lot of slamming doors in the course of the last few years.

Mr. Sayeed: rose—

Mr. Darling: How does the hon. Gentleman justify that? He should know because he lost his seat in 1992.

Mr. Sayeed: The right hon. Gentleman said that an average family paid £2,000 more tax during the previous Parliament, from 1992 to 1997. Will he remind the House by how much the income of an average family increased during that period?

Mr. Darling: Incomes have been rising over many years. The hon. Gentleman and his colleagues fought the 1992 general election on an explicit promise of reducing taxes—[Interruption.] They said:
Conservatives have an 'allergy to tax'",
and that they were
fighting for low taxation"—
[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. We can hear only one speech at a time.

Mr. Darling: Memories of 1992 seem to be painful for Conservative Members—although they are perhaps rather less painful than memories of 1997. So I shall turn to that manifesto. Labour's 1997 general election manifesto made it clear that we would not increase the top or the basic income tax rates. That was our promise—which we kept in our first Budget, last year, and which we will keep in every single year of this Parliament.

Mr. Nick Gibb: If the Chief Secretary says that the Labour party did not rule out tax rises before the Budget, does he deny also that, on 8 January 1997, on "The World at One", the Prime Minister said:
What I have said is the programme of the Labour party does not imply any tax increases at all"?

Mr. Darling: The charge that my right hon. Friend the Prime Minister was referring to was one that had been made by the previous Government—that we had all sorts of hidden spending plans, which we did not have. We are sticking to the previous Government's spending plans, as we said we would.
As for hidden taxes, our manifesto was absolutely clear about what we would do. Moreover, we were repeatedly questioned on our pledge on the top and basic income tax rates. My right hon. Friends the Prime Minister and the Chancellor were questioned on that pledge, as was everyone else. The only ones who might not have noticed our pledge were Conservative Members—but that does not surprise me. On most days of the general election campaign, they were not fighting us so much as they were fighting each other. It is therefore not surprising that they did not notice what was in our manifesto.
Everyone who went to the polls on 1 May 1997 would have been very aware of our statements, and of our explicit promise on the top and basic income tax rates. I remember my right hon. Friend the Chancellor saying that no prudent Chancellor or shadow Chancellor could ever exclude examining other aspects of the tax system—which was the same point that was made, to his credit, by the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who is in the Chamber. No Chancellor would want to box himself in in such a manner.
We have kept our promises on the top and basic rates of income tax, and we have kept two other tax promises. First, we delivered on our promise to reduce to 5 per cent. VAT on domestic fuel. Secondly—yes, we will plead guilty to a tax rise—we delivered on our promise to impose a windfall tax on the privatised utilities. We implemented that tax, and the new deal—which that tax is largely financing—is about to be rolled out across the country.
The shadow Chancellor said that we inherited a "golden legacy"—but we inherited a situation in which the national debt had doubled in six years. We are now paying £26 billion annually on servicing that debt, which is more than we spend on schools.
Again in 1992, the Conservative party presented itself as the party of sound finance—which was one of the many reasons why it lost the 1997 general election. People did

not believe Conservatives on tax, or in their ability to control public spending. People remembered what the Conservative party said in 1992—that it would not increase taxes. In March 1992, Norman Lamont said that he could not
see any circumstances in which that would be necessary.
Yet, a year later, he was piling on taxes at every opportunity.
What about VAT? Let us recall what the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said about that. In March 1992, he said:
We have no plans and no need to increase the impact of VAT.
Two days later, he said:
There will be no VAT increase." — [Official Report, 28 January 1992; Vol. 202, c. 808.]
He said that he had
made it clear. We have no need and no plans to extend the scope of VAT.
Yet, on 16 March 1993, the then Chancellor of the Exchequer increased VAT on domestic fuel.
The VAT increase did not come as a surprise to Labour Members. We remember that, in 1979, we were accused of telling lies when we said that the Tories, if they were elected to government, would double VAT. The first thing that they did in government was to increase VAT from 8 per cent. to 15 per cent.

Mr. Clifton-Brown: Will the Chief Secretary explain why he and the Chancellor of the Exchequer continue alleging that the previous Government left such a terrible debt legacy, whereas only three countries in Europe meet the Maastricht debt criteria—Britain being one of them, ahead of France, Germany and Italy, all of which will not meet those criteria? How can we have left such a terrible debt legacy?

Mr. Darling: It is a pleasure to hear Conservative Members praying in aid, rather than abusing, other European countries. I repeat that the situation that we inherited was one in which debt was being added annually. We cannot sustain a situation in which the country spends more on servicing those debt levels than on education. As my right hon. Friend the Chancellor made clear in his Budget last year, and again when he introduced last year's pre-Budget report, our strategy has been to ensure that we have sustainable and sound public finances—which the Conservative party did not see to during its 18 years in government.

Mr. Geraint Davies: Will my right hon. Friend confirm that, between November 1996 and November 1997, the forecast for net public sector debt towards the end of the century decreased by £16 billion, which will be a £1 billion annual saving in interest costs?

Mr. Bernard Jenkin: Because of Conservative policies.

Mr. Davies: That decrease is not a hidden tax cost but a hidden tax reduction—which we would not have achieved with a Conservative Government.

Mr. Darling: The hon. Member for North Essex (Mr. Jenkin) said that the saving was achieved by


Conservative policies, but it was achieved by the action taken by my right hon. Friend the Chancellor in ensuring that debt levels are reduced, so that our public finances are sustainable.

Mr. Sayeed: Will the right hon. Gentleman give way on that?

Mr. Kenneth Clarke: rose—

Mr. Darling: No, I will not. I am very conscious that this is an Opposition debate, and I should not wish to intrude on the speeches that Opposition Members would like to make. However, I shall certainly give way to the right hon. and learned Member for Rushcliffe.

Mr. Clarke: I hope that the right hon. Gentleman will agree that I have been fairly patient while listening to his bizarre interpretation of the Chancellor of the Exchequer's inheritance. Does the right hon. Gentleman agree that the Government took over a situation in which I had underestimated the rate at which the public sector borrowing requirement was falling and in which we were on course for a balanced Budget before the end of the century—with the inevitable consequence that we were on course to reduce the national debt as a percentage of gross domestic product?
Will the Chief Secretary also recall that, when we fought the general election, our only economic debate was on Labour's plans to increase taxation? The then Chief Secretary and I stated possible ways in which we thought that the Labour party would raise taxation for various reasons—including its spending commitments to allow local authorities to spend capital receipts and to ease capping limits, which the Government have implemented.
The Chief Secretary and the Chancellor denied any intention of raising taxes. During the general election campaign, we were accused of scaremongering, as the Chancellor denied in terms that he would touch PEPs or TESSAs, or that he would tackle the tax treatment of pension funds. As the Chief Secretary looks back to the general election, he should look back with shame.

Mr. Darling: Last night, when I wrote to the right hon. and learned Gentleman stating that I might refer to him in the debate, I knew that he would probably turn up just to hear what I said about him. I shall deal with some of those points— [Interruption.] My letter merely demonstrates that we observe the courtesies of the House.
I shall deal now with some of the points made by the right hon. and learned Member for Rushcliffe, and return to one or two of them later in my speech. I was particularly struck by his point that, in November 1996, he and the then Chief Secretary launched an allegation that Labour had 89 spending promises. I remember that very well, and was very grateful that the Conservative party should tell us about those promises several months before the general election. As he knows, most of those allegations simply did not stand up. One or two of them—such as a reduction in class sizes—formed part of our manifesto. However, the point is that the Conservative party accused us of having all sorts of quite fantastic spending commitments that were simply not true.

Privately, the right hon. and learned Gentleman might accept that. I shall return to the subject of company taxation shortly.

Mr. Sayeed: Will the Chief Secretary give way?

Mr. Darling: No, I will not. This is an Opposition day debate, and no doubt the hon. Gentleman and others will try to catch your eye, Mr. Deputy Speaker.

Mrs. Ann Winterton: Will the Chief Secretary give way?

Mr. Darling: I have made it clear that I am not giving way for the moment.
The right hon. Member for Hitchin and Harpenden (Mr. Lilley) did not mention national insurance. Hon. Members will recall that the then Prime Minister said explicitly that he had no plans to raise the top rate of tax, but a year later the Conservatives increased it from 9 per cent. to 10 per cent. Reference has been made to mortgage interest tax relief. It was said that we had done a terrible thing. The 1992 manifesto stated explicitly:
We will maintain mortgage tax relief'—
but listen to this, a year later:
Luckily we didn't say at what rate.
That was the right hon. and learned Member for Rushcliffe, who, in his candid and appealing way, was quite frank about what had happened.
This is the essential point about the Conservatives. First, they made promises that they did not keep. Secondly, they raised taxes because of economic failure and misjudgment of economic signals in the late 1980s. Thirdly, it was not tax reform that was driving the increases; tax increases were necessary because of the Conservatives' failed policies. There was no long-term vision, and no strategy. It was simply a matter of rushing around with a biscuit tin trying to gather money—a series of short-term fixes that ended in economic and, certainly, political failure.

Mr. Kenneth Clarke: Will the Chief Secretary give way?

Mr. Darling: I will do so in a moment. The right hon. and learned Gentleman may wish to deal with the point that I am about to make.
One thing that illustrates the short-term nature of the last Government is what they did to the corporate sector. We have been criticised for removing major distortions of the company tax regime by scrapping the payable tax credits and ACT, but the point is that businesses gain in the long term, after the transitional period. We took that action because we believed that managers or investors, not the tax system, should decide on companies' strategy—whether they should retain or invest profits. We think that that decision is right in principle.
When I looked back to see why the Tories had cut ACT in 1993, and to see what issue of principle obtained then, I found it quite revealing. The then Financial Secretary,


the right hon. Member for Charnwood (Mr. Done11), gave this explanation of why the Tories had cut ACT. They needed to raise revenue
from a group of people with taxable capacity, but who are not taxpayers, in a way that does minimum economic damage".— [Official Report, Standing Committee A, 15 June 1993; c. 377.]
No principle was involved. The Tories cut ACT because they needed the money. Norman Lamont, who was then Chancellor, was quite up front about that. No issue of principle drove the Tories' company tax reforms.

Mr. Jenkin: Will the Chief Secretary give way?

Mr. Darling: No, I will not.

Mr. Kenneth Clarke: rose—

Mr. Darling: Yes, I was going to give way to the right hon. and learned Gentleman.

Mr. Clarke: I thank the Chief Secretary for being kinder to me than to my hon. Friend the Member for North Essex (Mr. Jenkin). I genuinely appreciate his courtesy.
The Chief Secretary ignores the fact that Norman Lamont's change brought ACT into line with the 20 per cent. rate. That has already been pointed out. Subsequently, we did not increase corporate taxation—although the Labour party made tremendous play of the tax increases that we made—because we wanted to look after the industrial recovery that was getting under way, which brought about the falls in unemployment that we eventually produced.
Does the Chief Secretary concede that his Government have loaded £22 billion on to the corporate sector over the lifetime of the current Parliament? Combined with high interest rates and a high pound, that is already bringing what is left of our manufacturing base near to a state of recession. Industrial production is falling because of the Government's tax policies, which were not announced at the time of the last election.

Mr. Darling: I do not accept any of that. Had the right hon. and learned Gentleman taken the appropriate action on interest rates before the election, some of our difficulties might have been avoided.
When it comes to making long-term judgments, whether on tax increases or on anything else, the Government's whole record leaves much to be desired. In the late 1980s, which many Conservatives now try to disown as if that period was nothing to do with them, they completely misread the economic signals. They did what the Liberal Democrats want us to do—looked at optimistic figures, and started spending money as if everything was sorted out. That is precisely what the Liberal Democrats' amendment calls on us to do.
In the late 1980s, the last Government went on a spending spree, with the result that inflation nearly doubled in the space of two years and interest rates went up to 14 per cent. That legacy resulted in one of the deepest recessions that the country has ever seen. When it came down to it, the last Government were always looking for the short-term advantage rather than the long-term interests of the country.
We are committed to a strategy that is fair and seen to be fair. That is why we reduced VAT. We want to encourage work, and to make work pay. That is why we are examining the whole question of tax and benefits. We have cut the main rate of corporation tax. The Conservatives ask what we have done for business. We have cut the rate of corporation tax, and indicated a further cut to come. That helps the profitability of companies.
We introduced a windfall tax on the privatised utilities, which had made colossal profits because of the way in which they were privatised. That money is now being used to get the young and the long-term unemployed back into work. We have taken the necessary action to prevent overheating in the housing market—just as the Conservatives did, to give them credit, although they do not like to admit it now. Norman Lamont, whom many of them now pretend never to have known, recognised that there are circumstances in which a Government must take the necessary action to ensure that house prices do not escalate as they did in the late 1980s, when Nigel Lawson completely relaxed any sensible and prudent control.
We set in place a long-term framework for interest rate decisions, to keep inflation down. We are committed to the golden rule for prudence in public spending. We have set out a tough five-year deficit reduction plan, to which the Government will rigorously adhere. We will not make the mistakes of earlier Governments, Conservative or Labour, who failed to control public spending and then had to cut back as a consequence of that failure.
We have learnt the lessons of the late 1980s, when public finances and the economy's ability to sustain growth were completely misjudged by the last Government, plunging us into the longest recession since the war. Next Tuesday's Budget will not be a Budget for quick fixes in the short term; it will be a Budget for investment in the long term. We will continue to lay the foundations to build a more dynamic and successful economy, but we will not sacrifice our spending discipline and our commitment to prudence. Instead, there will be consistency to ensure long-term prosperity.
We have inherited a £400 billion national debt. As I have said, we have inherited £26 billion a year in interest payments, and a borrowing requirement last year of £23 billion, with the deficit due to continue into next year. We need to get that under control, and to ensure prudence in our public finances. That is our priority, not just in one year but in every year across the economic cycle. Just as there will be no return to boom and bust in the economy, there will be no return to soft options in public spending.
We were elected because we said that we would take the long-term view. We said that we would make tough decisions, because that is the only way in which to guarantee our future in the long term. That is the difference between this Government and the last. We are prepared to look to the long term. We are prepared to make the decisions that we need to make. But, above all, we look to the long term. Encouraging enterprise and work, and making work pay, are at the top of our agenda.

Mr. Quentin Davies: Will the Chief Secretary give way?

Mr. Darling: No, I will not.
Today's debate has shown that the Opposition have learnt absolutely nothing from their defeat. When they were asked a simple question about whether they would


reinstate payable tax credits, they could not answer. The truth is that, nearly a year after the election, they still do not know where they are—which is why they have called a debate today to fight the battles of more than a year ago.
In contrast, this Government are looking to the long term for the good of the whole country. We are laying the foundations for the future. That is why we enjoy the trust of the people of this country, and the Conservative party does not.

Mr. Malcolm Bruce: I was astonished to see the Conservatives' motion on broken tax promises. It shows that, despite all the disappointment after the general election, someone at the Conservative party still has a sense of humour. It may be normal for politicians to try to change their spots, but we have never seen such an absurd attempt to re-brand after so short a period of penance.
Do the Conservatives honestly believe that we have forgotten their record and the broken promises on value added tax, mortgage interest tax relief and general taxation? Have they forgotten their hidden taxes and the way in which they forced council tax up to shuffle off the responsibility to local government?

Mr. Jenkin: That is what Labour is doing.

Mr. Bruce: If the Conservative party's complaint is that the Labour Government are playing tricks on the taxpayer, we might ask who taught them those tricks. The Conservative Government had an 18-year history of deception over tax. Did they tell people in manifestos over those years that, when they promised to cut income tax, they intended to finance it by more than doubling the rate of VAT? Of course not.

Mr. Jenkin: When they were opposing VAT on fuel, did the Liberal Democrats ever explain to the electorate the consequences of a carbon tax?

Mr. Bruce: We most certainly did. The former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), said that any responsible Opposition party would present a draft alternative Budget, which the Liberal Democrats have done every year. Does the shadow Chancellor intend to produce an alternative Budget this week to tell us what the Conservative party would do, rather than simply attacking the Government for pursuing many of the policies and approaches set in train by the previous Government?
I asked the Library to look at the effects of both Tory and Labour Budgets since 1992. If the tax rises in the Tories' 1993–94 Budgets were continued, on automatic indexing, to the end of the century, they would amount to £109 billion. That is an extraordinary increase for a party that came to power on a pledge to reduce taxation. After 18 years, the Conservatives presided over higher taxes than they inherited in 1979.

It is not at all clear from the motion what the Conservative party is opposed to or, indeed, what it is in favour of. It has a record of constantly introducing hidden, deceptive taxes, yet it complains when the new Government do exactly the same.

Mr. Lilley: Will the hon. Gentleman confirm that it is his thesis that neither the Labour party nor the Conservative party raised taxes as high as his party would raise them?

Mr. Bruce: We have stated clearly our objectives and priorities and what extra taxation would be involved. The other two parties have said that they can deliver, implying that one can have more for less. That has never added up. The Tories could never deliver, and Labour cannot do so now.
That is the fundamental reason why we set out in both our manifesto and our alternative Budget the cost difference in our policies compared with those of the Government of the day. This weekend, as we have always done, we shall produce our own alternative Budget. Are the Conservatives prepared to do that? The former Chancellor said that any responsible Opposition party would. I think that it has been confirmed that the Conservatives are not such a party.
The Tories have experienced 10 months of total shell shock in which they have been all over the place. They have now decided that perhaps they ought to do a little bit of opposing, but when asked what they are in favour of, they do not know. They have not come to terms with that part of opposition, because what they are in favour of is, presumably, what they were doing in government, which the people so firmly rejected. That leaves them in some understandable difficulty.

Mr. Iain Duncan Smith: The Liberal Democrats are in favour of everything and nothing.

Mr. Bruce: The hon. Gentleman may make abusive remarks, but he knows perfectly well that we are a party that does not merely rhetorically state that we are in favour of "education, education, education" but specifically states which elements of education we would invest in, how much it would cost and where the money would come from. In our view, that is how responsible politics should be conducted.
It is no wonder that the electorate are disillusioned by politicians who tell them only a quarter of the story. The good news is up front, but the price is hidden.

Mr. Oliver Heald: When the hon. Gentleman says that politicians say only a quarter of what they mean, does that apply to his penny extra on income tax?

Mr. Bruce: That extra penny has been clearly costed. At the time of the general election, the Institute for Fiscal Studies said that our costed proposals were broadly in line with the outcome. [Interruption.] If Conservative Members are implying that the institute is in some way not independent or responsible, so be it.
The Labour Government may argue, as the Chief Secretary said, that all that they specifically pledged in the general election campaign was that they would not


increase the basic or higher rates of tax, but they gave the impression, because they were sticking to Tory spending plans, that there would be no significant additional tax requirements other than the windfall tax. Indeed, the Prime Minister, as Leader of the Opposition, seems to have said that in so many words, and that is certainly what the electorate understood.
The reality is that the Government have introduced massive tax increases, almost exactly comparable to those of the Tories when they were in government. The present Chancellor, as shadow Chancellor, said that he was determined to build a new trust on tax with the British people and to get tax rates down for ordinary families, but that is hardly what has been happening.
The Library confirms that, since the general election, the Chancellor has raised taxes by £30 billion, excluding the huge rise in council tax that is now taking place. The Government did not want to publish those facts, but they have been calculated by the Library.
Those tax rises—fuel and tobacco duties, mortgage interest tax relief, taxes on pensions, business taxes, council taxes and many more—affect all parts of society, and the Labour party has been in power for less than a year. Our point is certainly not that all those tax rises were unnecessary or undesirable.

Mr. Darling: What exactly is the Liberal Democrats' position on tobacco duties? Do they think that they should go down or up?

Mr. Bruce: Our position is entirely clear. Our manifesto said that we would increase tobacco duties in order to abolish dental and eye test charges. The Labour and Conservative parties are not getting the message. It is a question not of whether one is in favour of taxes but of whether one is prepared to tell the electorate honestly the costs of one' s programme and how one intends to raise the money.
We said frequently before the general election that the state of public finances meant that any pre-election tax cuts would be unsustainable. We had the honesty to say on the record that taxes could not be cut and would have to rise somewhat after the election.
Before the election, the Labour party voted in favour of tax cuts. Afterwards, it piled the taxes back on, just as we predicted. How does that strategy help to avoid boom and bust? Such chopping and changing creates uncertainty among voters and businesses and in the economy in general.
The Conservative and Labour parties are acting like a pair of pickpockets: the quickness of the hand deceives the eye, and the taxpayers' pockets are lighter.

Mr. Shaun Woodward: Not as light as they would be under the hon. Gentleman's party.

Mr. Bruce: The tax rises that are now in place, combined with the Conservative tax rises feeding through—

Mr. Deputy Speaker: Order. The hon. Member for Witney (Mr. Woodward) is out of order, and has a very bad habit of interrupting when other hon. Members are speaking.

Mr. Bruce: If the tax rises that are in place are fed through, without any change of Government policy,

the highest taxes in British history will be achieved at about the turn of the century. Not all the tax rises that have been put in place are necessary, and I do not believe that the Government believe that they are necessary.
The Government are getting their tax rises in now so that they can build up a war chest which may be used to boost spending in the run-up to the general election. That would give the appearance of cutting taxes just before the election and the Government could say how generous they were, but the Government would only be giving back to taxpayers the money that they took from them four years previously.
Labour Back Benchers should be aware of the implications of what is happening: if reports in today's press are anything to go by, and departmental spending limits are to be frozen for the next three years, control of the war chest will rest entirely in the hands of the Prime Minister and the Chancellor of the Exchequer, not in those of departmental Ministers and certainly not those of Labour Members. The Chief Secretary laughs, so I suspect that I have hit the right button, and that will happen.
It is evident from the projected size of the Government's cyclically adjusted current balance, and from their reluctance to reveal the figures in black and white, that a war chest is being built up. Again, I had to ask the Library to do the calculations. I look forward to the Government passing a fiscal responsibility Act that requires them to publish the figures and put them on the record, so that people are not forced to work them out from the information available.
The Chief Secretary implied that Liberal Democrats take the view that the Government should be irresponsible. Our view is that the Government are deliberately being extremely cautious. Andrew Dilnot told the Treasury Select Committee:
The Treasury and the Government are publishing forecasts"—
on public finances—
which are based on their view of what the worst case is".
Although the Government are being relatively cautious overall, the forecasts for a number of areas, in particular value added tax, are very cautious. The Government's cash flow gain from the proposed changes to advance corporation tax is not in the forecast, because it is a proposal. Andrew Dilnot continued:
At every possible point, I think the Government has…taken a cautious stance".
A projection of incomes for this Parliament shows a massive surplus which will enable the Government to reduce national debt, and to do a great deal more besides. One can therefore assume that there will be a spending objective, and probably a tax-cutting objective, in the second half of the Parliament. There is nothing necessarily wrong with that, except that it is inconsistent with the rhetoric used when the election was fought, which is the opposite of what the Chief Secretary claims. The Government's squeezing of public services now, and any throwing of money at them later in the Parliament, will create a bust-boom cycle in those services just when they are trying to squeeze such cycles out of macro-economic management. That is crazy and destructive.
It is impossible for the Government to fulfil their early pledges against that background: they have abandoned any pretence that they will cut hospital waiting lists, and class sizes are still rising.

Mr. Ivan Lewis: Why does the hon. Gentleman persist in peddling the myth that maintaining the spending limits of the previous Government is the same as pursuing their spending priorities? Before the general election, people in my locality faced £5 million of cuts in our school budgets and 70 teacher redundancies. As a result of the extra money that has been provided by the Government for schools, there will be no cuts or teacher redundancies, and 95 per cent. of our five, six and seven-year-olds will be taught in classes of 30 pupils or fewer from September. In addition, bed blocking, where perhaps 70 or 80 elderly people blocked beds in our local hospitals, is no longer a problem as a direct result of extra money going into the national health service. Will the hon. Gentleman stop peddling the myth that we are not spending money on public services?

Mr. Bruce: The hon. Gentleman might be vindicated if his 409 colleagues were able to tell the same story for every constituency, but he knows that Government objectives—for example, cutting hospital waiting lists—have effectively been abandoned for the time being, which is the logical consequence of sticking to the previous Government's spending targets. I did not specifically say that sticking to Conservative spending plans necessarily meant that the Government were sticking to every detail of Conservative spending policy, but where did the cut in single parent benefits come from if it was not a Conservative proposal that the Government were forced to adopt to meet departmental spending totals? The shadow Chancellor could probably confirm that. Unless the Government are prepared to find the resources, it will be impossible for them to deliver their early pledges. Taxes have gone up, but public services continue to be squeezed, which is an irresponsible and unjustified way to manage the public sector that will seriously damage health and education.
We must change the way in which financial information is presented. If a fiscal responsibility Act had been passed, a statement of fiscal and economic priorities would have had to be put before the people before the general election, and there would not have been an emergency Budget after it. We could have debated the issues during the general election campaign on the basis of objective facts, rather than having the previous Government suppress information and the new Government alter figures to justify tax rises for building up a war chest to deploy later in the Parliament.
The cynical way in which voters have been treated will lead to a breakdown of trust. The Conservatives were thrown out of office after 18 years because they claimed that theirs was a tax-cutting party, but put overall tax levels up. Labour came into office with a pledge on taxes, but broke it within a year. The Government are manipulating the tax system to secure short-term political gain, but I must warn them that people will become cynical about that process. The Government are doing serious damage to the public services in the short term, which may take more than a Parliament to put right. The voters will make their own judgment on that

Mr. Ivan Lewis: The Government's record on taxation is a curious topic for the Opposition to choose for a Supply day debate. Most people accept that general elections are determined by two predominant issues—economic competence and the record of the Government of the day on taxation—and the record general election landslide of only 10 months ago was largely a judgment of the previous Government's record on those issues. When I read the title of today's motion, I wondered whether Conservative Members would finally let the Government into the secret of how they introduced hidden taxes and got away with it for at least 13 years.
Everyone accepts that, for years, the Tories cynically and unashamedly conned the British people on taxation. They claimed the mantle of being the party of low taxation and economic competence for election after election, but history shows that we had a boom and bust economy. When the Tories left office, the tax burden on the British people was greater than when Labour left office in 1979.
As the Tories systematically set about reducing income tax, other taxes were increased and introduced. We need only consider commitments and promises that were made by senior Conservatives while they were in government. Before the 1992 general election, the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said:
In the next Parliament we will go on tax cutting. We will make that our aim year after year".
What happened during the last Parliament? We had 22 hidden Tory tax rises, costing a typical family more than £2,000 extra in tax.
Before the 1992 general election, the right hon. Member for Huntingdon said:
We have no need and no plans to extend the scope of VAT.
What actually happened? VAT was imposed on fuel at 8 per cent., which is regarded by most people as one of the most disgraceful taxes imposed by any Government. We should not forget that they would have increased that 8 per cent. to 17.5 per cent., had it not been for the combined opposition of Labour Members and Tory Members representing marginal seats, such as my predecessor, who regarded it as the "nail in the coffin" tax. Little did he know that there were many more nails to come.
The Tories' tax record might have been defendable if it had contributed to economic and social renewal, but the legacy of their 18 years in government is underfunded and underperforming schools and hospitals, record expenditure on welfare, not work, and a crumbling infrastructure. I find it strange when Conservative Members talk about the decline in manufacturing industry, which was one the greatest legacies of Thatcher years, but choose to blame us for that after only 10 months in office. They presided over a second-rate economy and deteriorating public services, despite the fact that they had the proceeds from North sea oil revenues and the income generated by the privatisation of public utilities. No better windfall has been available to any Government in history than the one the Tory Governments had at their disposal.
The British people are entitled to ask, "Where did all our money go during those years?" The answer is relatively straightforward: the Conservative party chose disproportionate tax cuts for the few at the expense of the


many; they chose to pay the bill of economic failure, funding unemployment instead of investing in jobs; they chose to steal from the taxpayer, as demonstrated by the scandalous sell-off of some of our public assets—flogged off at knockdown prices to fat cats with share options and excessive salaries.
Let us compare and contrast that record with the Labour Government's mere 10 months in office. In our election manifesto, the current Government made some clear promises. We promised to reduce VAT on fuel to 5 per cent. and we have delivered on that commitment. We promised a windfall tax on the excess profits of the privatised utilities in order to fund the most ambitious welfare-to-work scheme in our history. Despite being told before the election that the windfall tax would be illegal and unfeasible, we have done it and young people, the long-term unemployed, disabled people and single parents are all to be given opportunities denied to them during the years of Conservative government. We have kept our promise not to put up the basic or top rate of income tax. We have kept our promises not to extend VAT to food, children's clothes, books, newspapers or public transport fares. It is true that we hid the fact that we would reduce corporation tax to the lowest level ever seen in this country; we did not say that before the election, so if we are to be accused of a hidden tax, we shall accept that one.
Conservative Members accuse the Government of 17 tax rises, but they fail to say that, of those 17, seven are the closure of tax loopholes. Does the Conservative party support the closure of tax loopholes? Would the Conservatives reinstate those loopholes if they were ever to regain power? They will not answer those questions. The truth is that the rationale behind the debate is straightforward: Conservative Members know that the British people will neither forgive nor forget their tax record. They know the true meaning and long-term political implications of the statement made by the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), before the last election. Conservative Members should remember what he said, because it will come back to haunt them time and again. He said:
The public will be deeply suspicious of any tax cuts because they remember we promised tax cuts last time and unfortunately weren't able to deliver them.
In contrast, the Labour Government will continue to keep their promises on tax. A fair tax system will encourage and reward those who work hard and play by the rules. It will be designed to benefit the many, not the few. It will underpin the Government's belief that economic prosperity and social justice are inextricably linked. The Conservatives should understand that our record in government will once and for all undermine their smears about Labour and tax. Theirs is no longer the party of law and order, no longer the party of business and now no longer the party of low taxation or economic competence. I sincerely hope that they can find a new niche in British politics—after all, a healthy democracy requires a credible Opposition.

Mr. Geoffrey Clifton-Brown: It has been 10 months since the general election, yet what an insidious record the Government have on tax.
The Labour Government hit the home owner by reducing mortgage interest relief at source, but one of the worst aspects of the tax changes introduced by the Labour

Government is that most of them hit the poorest in society hardest. Let us take the cut in MIRAS. The maximum tax relief available under MIRAS is about £340 a year which, to someone on the top rate of tax, is not a huge sum, but to someone on the basic or lower rate of tax, who would not even get that amount, it is a considerable sum.
The tax changes will hit all our constituents, including the elderly. One of the most insidious changes of all was the abolition of ACT. The Association of Consulting Actuaries has worked out that someone aged 30 saving £100 a month would have to increase his or her pension by 12 per cent. to maintain the same level of pension. The abolition of ACT has other consequences: companies will have to pay out higher dividends because they will be pressured by pension funds and other investing companies that want the same level of return, so the yield on gilts will fall. That has a knock-on impact on other savers.
The tax changes hit the young, by reducing the grants paid to students. Poor parents are hit by the abolition of the assisted places scheme. Above all, the Government have shifted money away from rural areas to urban areas. [Interruption.] If Labour Members listen, they may learn something. To increase taxes on petrol is discriminatory against rural dwellers, whose cars are essential. Many of them cannot get to the doctor or to the post office to claim their benefits without use of a car. Labour Members will say that that is our fault for deregulating the buses, but it would never be economic to run a bus service in many places. In my constituency, the hamlets are too small for a bus service to run, so the residents have to rely on their cars for day-to-day living.
We have already had a 6p increase in petrol in the November Budget and, no doubt, there will be a huge whack put on petrol next week. Rural dwellers will not forgive the Government for those increases in petrol duty, nor will they forgive the huge increases in council tax that they will have to pay. Under the local government support settlement, urban areas were given good settlements—for example, the increase in Sedgefield was a staggering 13 per cent., whereas we in rural Gloucestershire received an increase of only 5 per cent. I ask the Chief Secretary, who has just left the Chamber, whether that sort of gerrymandering of funds away from rural areas is fair.
We are seeing the same in the national health service. The national increase in NHS funding was 2 per cent., but rural Gloucestershire got only 1.4 per cent. The result is that each day in the health service in Gloucestershire, 100 people who, clinically speaking, should not be there block beds and, as a result, operations are cancelled and waiting lists get longer. The Financial Secretary should listen to these points. It costs about £150 a day to keep someone in hospital, whereas it costs between £30 and £50 a day to give them a proper domiciliary care, residential care or nursing care package and so get them out of hospital. Nationally, such policies make no sense whatsoever.
The Budget is coming up next week. I have already alluded to the road tax increase that it is likely to introduce, but I have no doubt that it will contain further tax increases. Savers have already been penalised by the abolition of personal equity plans and tax-exempt special savings accounts. It would be interesting to know from the Financial Secretary whether the report in today's Financial Times that she is thinking of scrapping the £50,000 limit is true.


The Financial Secretary has, I hope, listened to the savings industry, which reckons that it would be almost impossible to police that lifetime limit. In any case, it would set a dangerous precedent of a retrospective tax. I hope that she will be able to give at least my middle-England, middle-income and low-income constituents some cheer, if not this evening, then in the Budget, by saying that the £50,000 limit will be scrapped.
The Conservative party left this Government the golden legacy of the best-performing economy in Europe. We had the golden scenario, which has been achieved only twice since the war, of growth outstripping inflation. This evening, we have heard much about Government expenditure and taxation, but, as any economist knows, the only way in which to go on satisfactorily putting more money into public services is by achieving growth that is higher than inflation. The sad fact is that, because of the economic changes that the Government have brought about, growth is beginning to slow and inflation is beginning to rise.
The five interest rate rises since the election keep the pound far too high. Unfortunately, that is having a disastrous effect on our manufacturing industry. Today's business news page in The Daily Telegraph reports that the British Retail Consortium reckons that
annual sales growth fell from 6.1 per cent. in January to 3.4 per cent. in February".
Much more important, the article says:
Separate figures yesterday reveal that output of British-made goods stagnated in January for the second month in a row and has fallen by 0.6 per cent. over the past three months. Simon Briscoe of Nikko Europe said: 'The message is clear—industry is on the brink of recession."'
It would be sad if this Government, who inherited one of the best economic circumstances since the war, by economic mismanagement put this great economy and this great country, which had such superb prospects, into recession in two and a half years' time.
The Government have not taken into account the damage that the strength of the pound is having on manufacturing industry, the deflationary effect throughout Europe that meeting the Maastricht criteria will have, the deflationary effect of the situation in the far east and, above all, the deflationary effect of the structural problems with the American economy. I will hold the Government to account, as will my constituents, if we run into a recession in two and a half to three years' time. Sadly, that is what may happen.

Mr. Bill Rammell: We have had an interesting debate, but unfortunately it has generated much heat and not much light. We heard the accusation from the right hon. Member for Hitchin and Harpenden (Mr. Lilley), the shadow Chancellor of the Exchequer, that, during the general election campaign, the Labour party made a commitment that it would never raise any taxes. Yet, as my right hon. Friend the Chief Secretary to the Treasury has rightly pointed out, during that campaign, every time interviewers said, "You have said that you will not raise the top and standard rate of income tax. What about all those other indirect taxes?", the then Chancellor and then Prime Minister said that no

responsible Chancellor would give a commitment on the 200 or so indirect taxes and tax reliefs. Therefore, to claim that we have acted differently from that is extraordinarily misleading.
We have heard accusations over tuition fees and the response to Dearing. During the general election campaign, we said clearly that we would accept the outcome of the Dearing report and that is broadly what we have done, with the exception that we have protected the poorest students, which should be the Government's absolute priority.

Mr. Heald: Where does the Dearing report mention scrapping maintenance grants? While the hon. Gentleman is talking about taxes, by how much is his council tax going up in Harlow?

Mr. Rammell: Our clear commitment during the general election campaign was that we would move from a system of maintenance grants to one of student loans. We said that we would accept the rest of the Dearing package, which is what we have done, with the exception that we have protected the poorest students.
The right hon. Member for Hitchin and Harpenden had the audacity to lecture us about decent pension provision. When the Tories were in office, they encouraged people to opt out of decent company schemes—which was never going to be in their interests—and millions of pensions were mis-sold, from which many people are still suffering. On that issue, a period of silence from the Opposition would be appropriate.
The right hon. Member for Hitchin and Harpenden said that Labour was bad for business and that the Conservative party would defend business. What is bad for business is the refusal of a once-great party to judge the issue of economic and monetary union on its merits. Instead, it digs in with an extreme ideological position, which leaves business despairing about the Conservatives' attitude towards one of the most crucial issues that we face as we head towards the 21st century.
I had to check my notes when I was listening to the shadow Chancellor. I heard him say that any tax reduction by the Government would be welcome. This Government have made it clear that they will not raise the top rate of income tax, but, presumably, from what the right hon. Gentleman has said today, he would welcome a cut in the top rate of income tax. Nothing could demonstrate more clearly the Conservative party's fundamentally misplaced sense of priorities, given the problems that we face in public services and the need for any tax reductions to be targeted at people on low incomes. I would welcome confirmation from the Opposition Treasury Front-Bench team that that is what the right hon. Gentleman was saying.
The hon. Member for Cotswold (Mr. Clifton-Brown) spoke about the reduction in MIRAS. Has he conveniently forgotten, just 10 months after the general election, that it was the Tory Government who cut MIRAS year on year? He went on completely to dismiss the impact of bus deregulation on the provision of public transport in rural communities. It is convenient to forget that impact. We will not let Conservative Members forget the fact that they introduced bus deregulation, since when bus services in


rural and urban areas alike have decreased by 25 per cent. They need to remind people in rural areas about that as well.

Mr. Clifton-Brown: The point that I was making about MIRAS is that the cuts that have been imposed by this Government are regressive. We restricted MIRAS to the basic rate of tax because we felt that we were being too generous. Therefore, my point is entirely valid. The effect on low-paid people is much more severe if MIRAS is abolished altogether.

Mr. Rammell: The hon. Gentleman is conveniently trying to correct history after what happened, year on year, under the Conservative Government.
It speaks volumes that, as usual, the hon. Member for Gordon (Mr. Bruce), the Liberal Democrat Treasury spokesperson, has walked into the Chamber, made a speech and then walked out. Nothing undermines the case for constructive tax-and-spend policies more than dishonest and irresponsible opposition that is based on plans that simply do not add up. The Labour party had 18 years to learn that fact. Unfortunately, it will take the Liberal Democrats much longer to learn it.
Liberal Democrats support the new deal, yet do not support the windfall tax to fund it. They say that they want council tax capping to be lifted, but they oppose every council tax increase that is introduced. They have committed themselves to raising £6 billion in extra taxation and £23 billion in extra borrowing, all to be funded from the famous penny on the standard rate of income tax. That is irresponsible gesture politics.
The heart of this debate serves as a smokescreen for the Conservative party on a range of issues. It is trying to claim that it may have been wrong and dishonest during its last period in office, but that all politicians are much the same. The reason why it makes that claim is that, at the general election, it was convicted by the British electorate of dishonesty in public life, with the cash-for-questions affair, and of abusing and misusing the power of patronage, with the appointment to public bodies only of people who carried Conservative party cards. Most importantly, the Conservatives were convicted of breaking key and specific pledges given before the 1992 election. Let us examine what happened under the Conservative Government.
The charge against the Conservative party was not based on statements that we took out of context—words which, as the right hon. and learned Member for Rushcliffe (Mr. Clarke) once infamously and disingenuously claimed, were said off the cuff on a wet night in Dudley. The charge was that the Conservatives broke specific commitments given in answer to specific questions. They knew exactly what they were saying and why those statements and claims were false. It has been a long history. It goes back as far as 1979, when Lord Howe said:
We have absolutely no intention of doubling VAT.
Yet as soon as the general election was over, that was exactly what he did.
In 1992 the Conservatives said that they would not increase the scope or rate of VAT or increase national insurance contributions. The right hon. Member for Huntingdon (Mr. Major) said at the time:
Unlike the Labour party, we have published our spending plans and there is no need for us to raise VAT to meet them. Neither, so there is no doubt, do we plan to raise the level of National Insurance contributions.
Yet that was exactly what the Conservative Government did in their first Budget after the general election.
The Conservatives claimed that they would cut taxes year on year yet, as Labour Members know, during 18 years of Tory government, the tax take as a proportion of GDP went up from 34.3 per cent. in 1979 to 35.8 per cent. in 1996. It was higher than in 1979 in every year bar one of the 18 Tory years.
No party in a general election campaign can or will give a commitment on every tax measure. It would give up its ability to govern and react to circumstances if it did. If one does not want to give a commitment, one does not respond to specific questions on that commitment, but that is what the Tory party did. It was challenged repeatedly on specific commitments and gave answers that were subsequently found to be false. That is what this debate is all about.
We have made it clear that the debate about tax is about trust. We gave a central commitment in the election campaign not on all the issues that have been discussed today, but on the standard and top rates of taxation. I do not deny that that has given us problems within the Government in that we cannot increase public expenditure as quickly as we would wish, but we made a commitment. We made a promise to the electorate. That is the fundamental difference between the Labour party in government and the party that is now in opposition.
I spent every year of my adult life until 1 May last year under a Conservative Government, and I find astonishing the degree to which the Conservatives have lost touch on tax and do not make their arguments with clarity. This is about faith and trust in politics. Those are the issues on which we convinced the people on 1 May last year and nothing has changed since then.

Mr. David Ruffley: In rising to support the motion tabled by my right hon. and hon. Friends, I am reminded of a conversation that I had during the general election campaign. An elderly voter remarked on a performance by the then Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair). That elderly voter, now my constituent, said that the right hon. Gentleman resembled nothing so much as an American-style, fake and phoney television evangelist pushing a dodgy creed. We all know what that dodgy creed was. It was the notion that a Labour Government would not increase taxes. It was a preposterous and incredible proposition. My elderly gentleman saw through that ridiculous claim. He saw it for what it was—a fake


and phoney promise—but others were not so lucky. They succumbed to the blandishments of the right hon. Member for Sedgefield.

Mr. Ivan Lewis: Was the elderly gentleman one of the 11 per cent. of people in this country who say that the present Leader of the Opposition would make a suitable Prime Minister?

Mr. Ruffley: Let us have sensible interventions on the point, which is the Government's record of breaking their tax promises.
My constituents saw through the phoney and fake promises. Others were not so lucky. Let me remind the House what manner of litany it was that took in so many people before the election. The right hon. Member for Sedgefield was reported in the Financial Times as saying to Birmingham business men on 21 September 1996:
We have no plans to increase tax at all.
On "Breakfast with Frost" on 12 January 1997, he said:
There are no hidden spending commitments and therefore, no hidden tax rises".

Mr. Geraint Davies: Will the hon. Gentleman give way?

Mr. Ruffley: In a moment. The hon. Gentleman may not like the truth, but the House is going to hear it. Do Labour Members deny that the right hon. Member for Sedgefield said on 8 January:
Any spending commitment that we have is properly financed, that means there are no tax increases implied by the programme"?
I give way to the hon. Gentleman. Did the right hon. Member for Sedgefield say it? Yes or no?

Mr. Davies: Talking of hidden taxes, may I ask for your view of tax in relation to the privatisation of British industry, in which public assets were sold at a net cost of £5.7 billion, if you compare the sale price with the value of the shares the following day? Does the hon. Gentleman accept that the give-away of £5.7 billion of public money was a hidden cost?

Mr. Deputy Speaker: Order. The hon. Gentleman must be careful about using the word "you". It applies to the Chair.

Mr. Ruffley: We are talking about hidden taxes. The intervention was not even worth waiting for.
Perhaps I could continue by talking about the assistance lent by the right hon. Member for Dunfermline, East (Mr. Brown), now the Chancellor of the Exchequer. He was at it as well before the election. He is the self-styled iron Chancellor, but before the election, he said on 20 January 1997 on "Newsnight":
It's my aim to get the burden down for ordinary people".
On Channel 4 on 27 April, he said:
I want to see tax cut for the ordinary family".
At a Labour press conference on 16 April, the right hon. Gentleman said:
we have always said that we want to reduce the tax burden for ordinary families.

Those were words spoken by Ministers in the Labour Government. We should draw attention to that fact because they have broken their promises.
Those taken in by those words will not be fooled again because they know that following the so-called emergency Budget last July, the average household is paying some £650 more. In my region of East Anglia, the average family is losing slightly less—about £630. That is because the Government have introduced 17 new taxes. I do not have time to go through the new Labour, new tax litany. We all know what those taxes are. Four in particular have struck my constituents. We have the mortgage tax—the cut in MIRAS and several increases in mortgage rates which are hammering home owners in my constituency and throughout the country. We have the pensions tax arising a result of the abolition of advance corporation tax. We have high council taxes—something that the Labour party did not tell us about before 1 May. We have higher petrol duty. The increases are greater than any announced by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). They are 6 per cent. per annum, and they were brought forward by five months last year. That is a double whammy for rural drivers, for whom a car is not a luxury but a necessity.
The shire counties, particularly my county of Suffolk, are discomfited by the prospect of a 27p a gallon tax increase in the coming Budget. We know of the increase because one of the Chancellor's special advisers leaked it to the Evening Standard. We can only hope that, by protesting on behalf of the shire counties, many of which Conservative Members are proud to represent, we shall shame the Chancellor into not going ahead with such exorbitant tax hikes. We hope that he will keep the petrol increase down to a sensible amount.
Many of my constituents are amazed by the way in which Labour pretends to listen to the rural areas and the shire counties. Only this morning, we heard a report on the "Today" programme to the effect that the shire counties faced average council tax increases for the coming year of 11 per cent—far more than the increases in Labour-dominated urban areas.
These are all tax hikes which Labour said it would never inflict on ordinary people. But they will not be hidden tax increases for much longer. The public are beginning to see them for what they are—and the Labour party for what it is: politicians, men and women, without principles, without scruple and without any sense of shame, who deceived the British public before the election about the true nature of their tax policies.

6 pm

Mr. James Plaskitt: This debate is about credibility, and it was audacious, not to say foolhardy, of the Conservative party to choose tax as the topic for debate. Perhaps it was a form of aversion therapy, given its record and the electorate's recent judgment on it. I should have thought that a period of silent contemplation might be more appropriate. Instead, we have an attempt to create a smokescreen, as one or two colleagues have called it, to blot out the Tories' abysmal record.
Starting off the debate, the shadow Chancellor spoke for 23 minutes, in which he failed to mention value added


tax once. I wonder why. Labour Members recall the Tory party's 1992 election pledge that it had
no need and no plans to extend VAT".
What a worthless pledge that was. No wonder the shadow Chancellor omitted to remind us of it during his 23 minutes.
The fact is that the Tories are the VAT party. They introduced it in 1973; it was the subsequent Labour Government who reduced it. When the Tories returned to office, they increased VAT twice, more than doubling the rate, and they extended its scope time and again. In so doing, they broke every pledge on VAT that the party had ever given.
The history of VAT between 1992 and 1997 speaks for itself. VAT raised £35 billion in 1992 but £50 billion by 1997—a 43 per cent. increase in VAT revenue, which was much greater than the overall growth in revenue. The picture between 1979 and 1997 was even more dramatic. Over that period, real GDP grew by 49 per cent. but VAT revenue, in real terms, grew by 123 per cent.—this from the party that had
no need and no plans
to extend the tax.
Moreover, the Tory party continually widened the scope of VAT, to include: hot takeaway food and drinks, building alterations, civil engineering works, newspaper advertisements, cereal bars, iced tea, non-residential construction and property development, news services, incontinence pads, fairground rides, airport car parking, protective boots and helmets, fuel and power to businesses, water and sewerage services to industry, domestic fuel and power, travel and car hire insurance. Hardly an aspect of life escaped the Tory mania for imposing VAT. That is why I say that this is a debate about credibility on tax.

Mr. Woodward: Given the hon. Gentleman's clear instinct for avoiding any attempts at responsible taxation, if his party decides to increase VAT or widen its scope, will he give an undertaking to vote against his party?

Mr. Plaskitt: I was just going on to contrast the record of the Tory party on VAT with my party's record. My party has never increased the general rate of VAT. In fact, once before, we cut it; and in the lifetime of this new Government, we have already cut the rate on fuel and power.
The inescapable conclusion is that only Labour Governments can be trusted on VAT. We deliver on our VAT election pledges. We pledged to reduce it on domestic fuel and power, and we have already honoured that. We also made other pledges before the election—for instance, not to extend VAT to food, children's clothes, books, newspapers or public transport. We can confidently expect those pledges to be honoured, too.
Conservative Members may reluctantly accept that VAT is their Achilles' heel—perhaps they would like our attention to be focused elsewhere in an attempt to find any evidence of what the right hon. Member for Huntingdon (Mr. Major) described at the election as the Tories' "aversion" to tax. We can look in vain. Over their 18 years in power, there were reductions in income tax rates, but they were not the whole story.
The increase in national insurance rates clawed back 3.5p in the pound from the reductions in income tax rates. Taking VAT from 8 per cent. to 17.5 per cent. more than clawed back the rest, certainly for families on lower incomes. On top of that came the Government-engineered council tax hikes during the last six years of the Tory Administration.
While we are at it, we should recall all the other new taxes that the Tories implemented after promising at the 1992 election to cut taxes year on year. Tax allowances were trimmed: the cut in the married couple's allowance meant a tax increase for the average family of £500; and the cut in the personal tax allowance cost the average family an extra £145.
We were told at the 1992 election that MIRAS would be maintained; it was subsequently restricted, at a cost of £600 a year to the average family. There were also new taxes on top of that: a tax on contents and buildings insurance, a tax on vehicle insurance and mortgage protection policies, and the airport tax. Taken together, the changes meant a tax increase of more than £2,000 for the average family.
The tax record of the Conservative party is well known. The percentage of GDP taken in tax did not fall during its 18 years in power. The tax burden on people earning more than £64,000 fell, but it rose for everyone else.
The most remarkable aspect of the Tories' tax record is the fact that, despite imposing all this extra taxation year on year, despite the extraordinary bonus of North sea oil and gas revenues totalling £80 billion, and despite the even greater boost to the Government's coffers from the endless privatisations, miraculously the Conservatives bequeathed the new Labour Government an appalling record of public debt. They managed that despite a 48 per cent. real-terms increase in tax revenues over their 18 years in office. In fact, they displayed an extraordinary fecklessness with the national finances; it has no modern parallel. Over 18 years, the national debt increased from £91 billion to £400 billion—by more than 300 per cent., in other words. When they left office last year, there was a £23 billion hole in the Government's finances.
Over 18 years, the Conservatives chalked up public spending annual deficits of more than £300 billion—almost the equivalent of a full year's public spending. As a result, the average British taxpayer now contributes £1,000 a year just to meeting the cost of the Tories' legacy of debt.
This record of debt and taxation cannot be hidden behind the smokescreen of today's motion. It is a record of broken pledges, tax increases and mountainous debts. Little wonder that, at the end of it all, the right hon. and learned Member for Rushcliffe (Mr. Clarke)—I am sorry to see that he has left the Chamber—admitted in the run-up to the election that voters would be "suspicious" of further Tory tax promises. No wonder the electorate called an end last May to that orgy of tax and debt, now replaced by our Government's deficit reduction programme, prudent fiscal management, clear and consistent principles of fair taxation, and pledges on tax that are being honoured. The House will be suspicious of the Opposition motion.

Mr. Nick Gibb: This is a Government who told the British people that they had no need to raise taxes, that their programme was


fully funded, and that they had abandoned their past and become a low-tax party. It is interesting that the Chief Secretary is now so keen to narrow the commitment given during the election so that it applies to rates only, thereby admitting that taxes generally have risen under his Government.
The Labour manifesto said that the principles underlying its tax policy were, first, to encourage employment opportunities and work incentives; secondly, to promote savings and investment; and thirdly, to be fair and to be seen to be fair. Within 10 months—indeed, within two months of coming to office—the Government have breached all those pledges.
The Government have introduced measures that discourage employment and reduce work incentives. They have damaged the savings industry, and last July's Budget damaged business investment in this country to the tune of a £5 billion windfall tax, as well as £5 billion a year from the pension funds. Labour's tax measures have not been fair, and are certainly not seen to be fair. They discriminate against middle England, penalise thrift, and do nothing to help the less well-off.

Mr. Ivan Lewis: rose—

Mr. Gibb: There is a shortage of time, so I shall plough on, if I may.
Labour's manifesto also states that it is
pledged not to raise the basic or top rates of income tax throughout the next Parliament.
Posters throughout the country trumpeted that pledge, lulling the electorate into a false sense of security. Elected on that pledge in May, two months later, in July, the Government abolished the repayment of tax credits on dividends paid to non-taxpayers.
Non-taxpayers include two thirds of all pensioners. Many retired people in my constituency have a small portfolio of shares, the income from which they use to supplement their pension income. Before 2 July, they could claim back from the Inland Revenue the tax credits, which amounted to a quarter of the dividend that they had received. Now they cannot. The non-taxpaying pensioners whom Labour said they wanted to help are the very people who have suffered most from that measure. Age Concern has called on the Government to continue to pay tax credits on dividends to individual non-taxpayers.
Non-taxpayers include pension funds, which own £650 billion of assets on behalf of 19 million working people and 6 million retired people. The prospect of taxing such a pot of gold was too tempting for the Labour Government: £5 billion a year was too large a sum to avoid taking. Preventing pension funds from reclaiming tax credit on their dividend income will cost the funds £5 billion a year. According to the Association of Consulting Actuaries, the average 30-year-old working person will have to pay an extra £12 a month to keep his pension at the same rate. Chantrey Vellacott has said that, on average, the 19 million members of company or personal pension schemes will require an increase in contributions of £190 a year.

Dr. George Turner: Does the hon. Gentleman recognise that the figures regularly quoted from the

Conservative Benches are based on all other things being equal, and that the point of a Chancellor's Budget is to make sure that all other things are not equal? Will he therefore explain to the House how much the average pension fund has increased since the Government took office?

Mr. Gibb: If the hon. Gentleman had waited a few more seconds, I would have come to that.
The extra £190 a year is equivalent to a 1 per cent. rise in income tax. Is that not a clear breach of Labour's pledge not to raise the basic rate of income tax? It is worse than that, however. It is a hidden tax, levied in a deceitful way—a back-door method of raising the rate of income tax in a way that the Government hoped few would notice.
How will the measure help investment? How will it encourage savings? Both questions were manifesto pledges. When the measure was debated in Committee on the Floor of the House, the Economic Secretary said:
Many pension funds are in surplus by as much as £50 billion. In combination with the current high level of the stock market, that means that there is a much greater opportunity for funds to absorb the change without any great difficulty."—[Official Report, 16 July 1997: Vol. 298, c. 487.]
That has been the Government's line all along, and I assume that it is also the line of the hon. Member for North-West Norfolk (Dr. Turner): the £5 billion tax will be easily paid by the pension funds because of a soaring stock market, all other things being equal, as the hon. Gentleman says—no need for higher contributions or for increased rebates for opting out of SERPS.
That was the Government's claim. The reality is that the Government Actuary has had to recommend higher rebates. He stated:
As a result of the tax changes announced in the July 1997 Budget…the amount of dividend income from UK equities reduces by just under 20 per cent.
That will reduce dividend yields from about 3.5 per cent. to about 2.8 per cent.
There is no mention by the Government Actuary of dividend yields rising to absorb the pensions tax. He says that the yield has fallen. So, too, do the consulting actuaries Bacon and Woodrow in the Financial Times today. They say that one in four UK companies could be forced to put more into their pension schemes, following the abolition of tax credits on dividends. The shortfall, they say, could be as much as £5 billion—a familiar figure, and an answer to the hon. Gentleman's question.
Not only is the tax hidden; it will cost UK business money to put right the shortfall—money that could have gone into investment. The measure will reduce savings and damage pensions, both of which the Government said they wanted to boost.
The tax rise has caused many other problems. Abolishing the tax credit also meant that the Government had to abolish foreign income dividends at the same time, to avoid a flood of FID payments to absorb the £7 billion of unrelieved surplus advance corporation tax. That would have meant £7 billion of lost corporation tax receipts for the Treasury. However, the announced abolition of FIDs sent shock waves through British industry, particularly through companies with large overseas interests.
Little thought had been given to the consequences of the announcement, so in the Financial Times every other day from July to November were proposed solutions to


the great FID problem that the Government had created. During the Report stage of the Bill, the Paymaster General even mooted four possible solutions of his own, all of which turned out to be non-starters. Finally, in November, having given up hope of finding a solution, the Government simply proposed the wholesale abolition of ACT. However, that would cause a huge cash-flow dip for the Government.
The solution was to restructure the entire corporation tax system and introduce quarterly corporation tax payments on account. That gave the Government the opportunity to raise further hidden taxes, to the tune of £2 billion a year for the next four years, as companies have to pay their corporation tax bills significantly earlier.
Is that a fair tax, in line with the principles set out in Labour's manifesto? Is it transparent? How will taking £2 billion a year from the corporate sector increase investment? In its green Budget, the Institute for Fiscal Studies states:
The cashflow impact is unlikely to encourage investment, particularly in the short term.
The most extraordinary decision of all in the tax context is the Government's proposal to abolish PEPs and TESSAs, the most successful savings vehicles yet devised, and to replace them with ISAs. The measure was purportedly introduced to help to encourage savings by those on lower incomes, but the truth is that there is absolutely no advantage for any lower rate or even basic rate taxpayers to hold equity investments through an ISA. Few are likely to generate capital gains in excess of their own annual capital gains tax allowance, and the tax credit now reduced to 10 per cent. by the Government is unlikely to cover any management expenses.
Indeed, the Association of Unit Trusts and Investment Funds said:
We believe that the administrative and regulatory issues raised by the proposals would render the ISA complex, costly and, possibly, unworkable.
The association went on to say:
We believe the ISA will discourage people from raising their level of long-term savings.
The most iniquitous aspect of ISAs is the retrospection, penalising those who have saved, particularly the self-employed, who may not have an occupational pension but would have used PEPs to save capital, out of which their retirement income can be paid. The £50,000 limit is unfair to those people, as it generates an income of just £1,500 a year after tax, according to the Government's own figures. Age Concern has attacked the limit, saying:
Before deciding on an overall limit, the Government should look further into the circumstances of those with over £50,000 invested in PEPs".
On every other day, the FT index is treated to an informal leak mooting various proposed solutions to this fiasco. Here is another tax that is widely regarded as unfair, which discourages savings and penalises those in or approaching retirement.
Will the Financial Secretary confirm that next week's Budget will include fewer ill-thought-through proposals and fewer decisions such as the one to abolish FIDs without any thought about the consequences? We want to see fewer decisions such as the one to abolish PEPs and TESSAs without any thought about the consequences for the self-employed and the decision to introduce quarterly

corporation tax payments without any thought for its cash-flow problems and practicalities, including on what profit figure to base the payments.
The Government have sneaked through tax rises that are anti-thrift, damaging to investment and anti-middle England. They talk about increasing investment and then raise taxes on companies and investment funds so that those bodies must reduce investment. The Government talk softly about lone parents, and then remove their benefits. They promise to protect pensioners, and then take £5 billion a year out of pension funds. The Government claim to care for disabled people, but then propose to tax the disability living allowance. In opposition, the Labour party opposed tuition fees, but, in government, it has introduced them. The Government claim that they want to protect the monarchy, yet they do all they can to undermine it. The Government attack the countryside, and then send the Minister for the Environment to join a march against his Government.
This Government seek to be all things to all people. Their message to the people is: "We will be whatever you want us to be." In reality, the Government are what everybody does not want them to be. The Government have increased taxes, attacked middle England and told people what they can and cannot eat, and what they can and cannot do. The Government think that they can get away with a wholesale agenda of hidden tax rises. In short, this is an arrogant Government, who have let power go to their head.

Mr. Geraint Davies: The basic question that we must ask this evening is: what would be the tax situation in the nightmare scenario of another Tory Government? In such a scenario, the plans that Labour has made to reduce debt, increase productivity and skill, and translate welfare into work—all of which reduce future tax liability for this country—would not go ahead. That is the real question for the British public.
The Government inherited a legacy of millions on the dole who were unable to pay tax while others paid higher tax to support them. Britain had slipped down the skills league and we had witnessed the emergence of social exclusion and rising crime—all the symptoms of economic failure and a cost to future taxpayers. The challenge for Labour was to tackle that vicious downward spiral and the high tax-low success economy of the Conservatives. We have met that challenge.
Immediately upon taking office, we granted independence to the Bank of England. We do not know what Conservative Members think about that, but the impact was to reduce overnight long-term borrowing costs by 0.29 per cent.—a saving of £1 billion a year. That reduction has grown to represent a saving for the taxpayer of about £6 billion a year, which is equivalent to 3p on tax. What would Opposition Members have done? They do not know. I guess that, in an even-steven situation, they would raise tax by 3p—which is another hidden tax.
I said earlier that national debt forecasts have decreased by £16 billion in the past year, which will save the taxpayer £1 billion a year. That would not happen under the Tories, so there would be another hidden tax. What about the new deal? The essence of the new deal is to translate claimants into taxpayers. The Conservatives had no plans to introduce that programme, so there would be another hidden tax.
We have heard that advance corporation tax and pensions will make the Government £5 billion. Where would the Conservatives get that £5 billion—perhaps from value-added tax? That is another hidden tax. I shall not go into great detail about the pensions issue, which has been discussed already—we know that there is an actuarial difference of view. Pension funds are rising in value as share values increase along with market confidence. Setting interest rates outside the political control of the Chancellor means that there is no risk premium on investment in British jobs, and therefore industry can move forward. That is the reality.
What about Europe? The right hon. Member for Huntingdon (Mr. Major) has said that we should be at the heart of Europe, but the right hon. Member for Wokingham (Mr. Redwood) says in his book—I know that no one has read it, but never mind—that we should block the euro and derail the legislation, although 60 per cent. of our trade is with Europe. Would that be in the interests of the British economy? Would it translate into high hidden taxes? Of course it would.
Recent Tory history is a sad catalogue of waste and cost. The previous Government's failure to act decisively on bovine spongiform encephalopathy cost £3.7 billion—the equivalent of 2p on income tax in a given year. What about privatisation? As I said, the previous Government sold off British assets at £5.7 billion less than their valuation by the market the next day. That amounts to 3p on income tax in one year, so it is another hidden tax.

Mr. Richard Page: Will the hon. Gentleman give way?

Mr. Davies: I am sorry, but I do not have time.
What is the real cost of the 300,000 repossessions—there were 3,000 in 1979—that took place under the Tories? That is another hidden tax resulting from the bungling failure of discredited Tory Members.
The reality of the increases in council tax—the need for an extra £4 billion in local tax in the following three years—was disclosed in the Red Book by the previous Chancellor in November 1996. I could continue: we are talking about billions and billions, which is the equivalent of 10p on the standard rate of tax.
We do not want to hear any more lectures from Conservative Members about hidden taxes because we are dealing with enough of them now. Thank goodness we are getting Britain back to work, recovering our debt and putting the country on a good long-term footing.

Mr. Howard Flight: Labour Members are living in a completely unrealistic world. The Organisation for Economic Co-operation and Development, the International Monetary Fund and the World bank will confirm—as we well know—that the Labour party inherited the soundest economy in Europe, with the lowest unemployment of 5 per cent., the best fiscal record of improvement and the lowest debt. This debate is about the Labour Government's taxation policy: it is silly to seek to claim that the new Labour Government had to resolve major economic problems. That is a most unconvincing argument.
I suggest that the Chief Secretary and other Labour Members take a walk in Britain's leafy suburbs. The Labour party convinced many members of the middle class that they would be safe with Labour, as it was no longer a socially redistributive party pledged to increase taxes for the middle classes. As has been admitted in debate, Labour has not increased taxes but has followed a clear agenda, led by the Chancellor of the Exchequer, of finding other ways to tax the middle classes more.
Most of those measures have been described in the debate. I remind hon. Members that advance corporation tax has reduced the pensions that people will receive in future, and that those with personal pensions will have to pay about £20 week more to maintain their pensions.
Reference has been made to the charging of tuition fees to students attending university. Do Labour Members realise that the payment of £1,000 per annum by an ordinary middle-class family in middle England is equivalent to a 10 per cent. rise in income tax? Student loans were perfectly fair—students repaid them when they could afford it. I am sure that my colleagues will agree that it was a necessary reform in line with Dearing. However, tuition fees are quite different: they are a hidden tax on the middle class.

Mr. Rammell: Will the hon. Gentleman give way?

Mr. Flight: No. There are only five minutes left.
When I asked about the community tax, it was pointed out to me that, because my constituency has, allegedly, a higher income per capita than other parts of Britain, it is fair and just that the gerrymandering with central Government money should result in the community tax in West Sussex going up by some 11 per cent. There is a clear agenda to increase the taxes of shire middle England by devious means.
The Government have boasted that the abolition of the assisted places scheme is a measure of redistribution. I spoke recently to the headmistress of an excellent school in the state sector, and was interested to note that the number of applications to her school had doubled, led in part by the Prime Minister's wife, as it is a school of academic excellence. The headmistress complained that so many parents could not afford to pay for academic excellence, and that they are going into debt so to do. As the Government well know, the abolition of assisted places hit the members of the middle class who aspired to give their children a better education.

Mr. Ivan Lewis: Will the hon. Gentleman give way?

Mr. Flight: No. There is not much time.
Many Government Members made the point that the Conservatives let down the middle classes similarly when we were in government between 1992 and 1997. I personally take quite a degree of blame for that. Middle-class families paid more tax when they should not have, but I remind the Government why, because they are about to fall into the same trap. It was because—for which my right hon. Friend the Leader of the Opposition has apologized—we locked into the exchange rate mechanism and were stuck with rising interest rates when they needed to fall, and we had an uncompetitive currency. Those who wish to do the same when our own and Europe's economic cycles are so out of kilter will have the same future.
Where will the middle class be taxed more in the forthcoming Budget? Will it be in an increase of petrol tax; the abolition of mortgage interest relief at source; means-testing state pensions; limiting personal allowance to the standard rate of tax; taxing child benefit; and higher national insurance contributions? The Government know as well as I do that it will be some of those, and that all of them amount to the higher taxation of middle England.
Middle England is not deceived. It is well aware of what is happening. The crucial point is that it is not necessary. The reason for it is, as the hon. Member for Bolsover (Mr. Skinner) pointed out, to build up a war chest to try to bribe the electorate when the next election comes, but they will not be deceived. It is time the Prime Minister kept his pledge to middle England and started to reduce taxation on middle-class families, and not to increase it yet further.

Mr. David Heathcoat-Amory: It was striking how hon. Members on the Government Benches kept almost entirely off the subject of the debate. They talked about everything except the Government's tax record. Perhaps they are embarrassed about it. Perhaps they implicitly accept the points that we have made: that the Labour party has consistently broken its tax promises, and is, perhaps, afraid of what the future may hold.
Although this has been a short debate, it has confirmed beyond doubt that the Labour party explicitly promised before the election not to increase taxes and then immediately did so in a Budget some two months later. We are not really surprised by that, as it is one of the laws of nature that Labour Governments increase taxation, but we were all somewhat taken aback by the speed with which they broke their tax promises.
The Prime Minister could hardly have been more explicit in a speech that he made to business men in Birmingham when Leader of the Opposition—a speech to which my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who is shadow Chancellor, and my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) referred—when he said:
We have no plans to increase tax at all.
That is one of the few really clear statements about tax made by the previous Leader of the Opposition. At the end of that speech, he did not say, "Well, that's not really what I meant. When I just told you I have no plans to increase taxation, I meant that I do have plans to increase taxation." Nor, when he was reported the next day in the Financial Times, did he or anyone else write to the paper to say, "That was a pack of lies and does not accurately reflect my intentions if we win the general election." So it remained on the record as a clear statement of the Labour party's intentions.
However, within two months of winning the election, the Labour Government produced a Budget that reversed all that. Pages 40 and 41 of the Budget statement, published on Budget day in July, contains lists and columns of taxes that were increased. Even if one leaves out the windfall tax, which we agree that we were warned about, it adds up to a tax increase in the current financial year of £3.5 billion, rising by the end of the third year to more than £005 billion a year. There we have it. The Prime Minister promised before the election that he would not

raise taxes at all, and in the first Budget he did exactly that. If that is what no increases at all means, I hate to think what the Government will do when they get really serious.
There is an explanation, advanced by my right hon. Friend the shadow Chancellor. He pointed out that, when referring to the £5 billion-a-year raid on pension funds, the Financial Secretary—I am glad that she is to reply to the debate—said:
The measure is good for pensions and pensioners, not bad for them."—[Official Report, 3 July 1997; Vol. 297, c. 507.]
Again, she did not qualify that statement. I suppose that, if one really believes that taxing people is good for them, one feels rather less inhibited about doing so in successive Budgets, but it hardly explains the 17 tax rises in the first Budget. We have calculated them in exactly the same way that Labour did when it alleged that we put up taxes 22 times when we were in government. If the present Government continue at this rate, they will introduce four times as many tax increases during a full term in office. The 17 tax rises in the first Budget do not include many of the taxes to which my hon. Friend the Member for Arundel and South Downs (Mr. Flight) quite rightly referred, because that figure excludes the student tax and the double-figure council tax rises in place in most of our rural constituencies, which are a direct result of the Government piling on to local authorities obligations without matching them with the necessary funding.
To be fair, we were warned about one or two taxes. We were told about the windfall tax. We were also warned about the withdrawal of tax relief on medical insurance, but its withdrawal was not clever. Causing people to cancel their medical insurance policies and switching to the NHS has contributed directly to the breach of another Labour election promise: that it would get NHS waiting lists down. Instead, they have gone up by 100,000 since the election.
The central feature of the debate has been not only the number and scale of the tax increases but the fact that the full impact of the increases was hidden from the electorate. They are indeed stealth taxes. Old Labour, let us be fair, used to be fairly open about its tax plans. New Labour does it by the back door.
Take the pension tax. Labour thought that it would not be noticed because the damage was long term. The Chancellor said that the Budget would be for the long term, and in that sense he was right because the damage done to pension funds and people's savings will evolve over a long period. Labour went further than that. It tried to disguise the fact that it was raising taxes on pension funds at all. In the pocket Budget, produced at taxpayers' expense and circulated to the public, the only reference to that £5 billion-a-year tax raid on people's pension funds was the sentence:
The Budget makes other tax changes to encourage companies to invest profits in the future.
That is the only reference to the biggest raid on people's savings that Britain has ever seen in a Budget.
The point is that that was not just wrong and deceitful; it was stupid. If the economy was in danger of overheating last year, as the Chancellor said that it was, the last thing that he should have done was to tax savings because, by doing so, by taxing institutional savings rather than people, he transferred the burden of controlling inflation on to interest rates. That is why we have seen five interest


rate rises since the general election. That has hit investment, the strong pound has hit manufacturing—output from manufacturing industry fell again last month—and we are on the brink of a technical recession.
We know that the Chancellor has shuffled off responsibility—at least for the decision about interest rates—on to the Bank of England, but he cannot escape responsibility for a tax policy which went for disguise of his measures rather than economic effectiveness.
Taxing savings was stupid for another reason. The Government say that they are trying to reform welfare and cut welfare expenditure, but the only realistic alternative to the welfare state is for people to be reliant on private savings and private pension provision. That is precisely what the Chancellor hit in his last Budget, so taxing savings does not even make sense from that point of view.
The damage has already started. The National Association of Pension Funds is already reporting that many pension funds are reducing their prospective benefits, increasing the contributions demanded from their members, or switching from final salary schemes to money purchase schemes, which are less generous.
That was well set out by my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb). It is all right for Labour Members to do this because they, like us, enjoy a generous parliamentary final salary scheme. The Conservative Government's policy was to extend those benefits to as many people as possible. Labour's policy has been to retain those benefits for itself, but everyone else's benefits will be cut. Labour has done exactly the same with PEPs and TESSAs. Labour Members may have generous pension funds. In a debate last week, it was pointed out that the hon. Member for Bolsover (Mr. Skinner), who, sadly, is not in his place today, has pension entitlements worth a capital sum of £356,000; the Financial Secretary to the Treasury has been in the House for only 11 years, but she will be pleased to know that, already, her pension entitlement has a capital value of £140,000. It is all right for them, but the small business man, self-employed, trying to build up a modest pension entitlement to see him through hard times or his old age, is thought to be rich if he has £50,000 in a PEP or TESSA. That is new Labour—we are all right, Jack, but everyone else must pay the high taxes.
There is a rumour in the air of a U-turn on PEPs and TESSAs and the individual savings account, but we know where Labour's instincts lie. It tries to cut everyone down to £50,000. If there is a U-turn, as I believe there may be next week, it will be because of the taxpayers' revolt and our debate last week in which we explained to the Government what they were walking into.
What about the other stealth taxes? We have heard quite a bit in the debate about the reduction in VAT on fuel from 8 to 5 per cent. Leaving aside the obvious point that by far and away the biggest benefit enjoyed by users of fuel was the price reductions consequential on privatisations, all of which were opposed by the Labour party, and leaving aside the fact that the benefit increases that we brought in when we put VAT on fuel ensured that all pensioner households were at least as well off as they would have been without it, the real story on VAT and indirect taxation is that the Government have not only increased the rates on fuel, tobacco and alcohol, but—this

is a stealth point—brought forward the increases and made them more frequent in that we have had three Budgets in 16 months. Therefore, not only are the increases higher; they are more frequent.
For example, this year, 1997–98, the extra fuel duty amounts to £730 million as a result of the increase brought forward in the July Budget. We were not told that during the election either. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) was right to draw attention to the fact that that hits rural areas disproportionately.
Then we have the stealth tax on companies—the corporation tax changes. When the Chancellor announced the changes, he claimed that they had been welcomed by business; that business had accepted that it was necessary to move to the abolition of advance corporation tax and had welcomed the cut in corporation tax.
The Paymaster General, who, sadly, is not here—he is famously well informed about business matters—said that the statement had been welcomed by the Confederation of British Industry. That was not true. In a press release, the CBI said:
The proposals in the November pre-Budget report, together with the measures in the July 1997 Budget, could increase taxation on business by almost £22 billion during this Parliament.
If that is so, it is a pretty funny way of expressing support for the Chancellor.
Industry faces further falls in manufacturing output—that has just been confirmed by statistics released yesterday—higher interest rates, a higher pound and £22 billion of extra taxation in this Parliament. The Chancellor said that he wanted to rebalance the economy. Is that really the way that he intended to do it?
Some people who have not seen taxes go up are still waiting for the Budget next week. We wonder whether that includes the Paymaster General. To quote the Chancellor, those with
millions in offshore tax havens
have not so far been touched. We had a panic slamming of the tax avoidance door last Friday, but that does not seem to have affected the Paymaster General. The Labour Government have failed to tax those whom they promised before the election they would tax, and have taxed those whom they promised before the election they would not tax. Those are the priorities of new Labour and that is the reality of a new Labour Government.

The Financial Secretary to the Treasury (Dawn Primarolo): In the few minutes left in the debate, I want to reply to a number of questions. I must tell the right hon. Member for Wells (Mr. Heathcoat-Amory) that I would not buy a second-hand pension from him and I certainly would not rely on any pension advice from him or any of his hon. Friends. As my hon. Friend the Member for Harlow (Mr. Rammell) reminded the House, 500,000 cases of pension mis-selling have already been recorded in phase 1 and more information is to be announced on Thursday. That is a direct result of the policies of the previous Government.
It was a predictable speech from the shadow Chancellor but, in fairness to him, he said that he did not expect us to give him the Budget announcements today. Unfortunately, I am not sure that the shadow Chief


Secretary understood that. I am sure that all hon. Members will understand that for many of the answers they will have to wait for my right hon. Friend the Chancellor to announce the Budget next week.
The debate revolved around false promises and comparing records. It was a debate about therapy for the Opposition. They need the help of Labour Members if they are to come to terms with what happened when they were in government and why they lost the trust of the electorate.
Before dealing specifically with the previous Government's record, I shall respond to some of the points made by the hon. Member for Gordon (Mr. Bruce). For 45 minutes, there were no Liberal Democrats in the Chamber to take part in the debate. However, the hon. Member for Gordon did take part in the debate and accused the Government of being cautious. As ever, he wants to spend money everywhere, but cannot say where it is to come from. Apparently, the 1 p on tax is now not only for education but is to be used to write off everything that the Government inherited from the Tories. Presumably, he is urging the Government to be incautious. We shall not respond to that proposition.
My hon. Friend the Member for Bury, South (Mr. Lewis) reminded the House that the Conservative Government gave away the zero rate on VAT on domestic fuel and then tried to raise it to 17.5 per cent. He pointed out that they squandered billions of pounds of North sea oil revenues and that the list of accusations that they make against this Government includes the closure of tax loopholes. My hon. Friend challenged Conservative Members to say whether they were in favour of allowing those loopholes to continue. Of course, they did not want to respond. They do not want to have a policy for themselves, but simply want to create amnesia in the Chamber and among the electorate about what their Government did over 18 years.
We then had the incredible contribution from the hon. Member for Cotswold (Mr. Clifton-Brown) who professed concern for the low-paid. I do not know where he was when his Government were in office. He complained about the attack on MIRAS. What did he say to his Government when they cut MIRAS from 25 to 20 per cent. and then to 15 per cent.? Perhaps he can tell us what he thought about VAT on fuel. What did he say when his Government destroyed bus services with deregulation? What did he say to the then Prime Minister about the poll tax when the then Prime Minister said that he believed that, once the poll tax was fully understood, it would be seen to be very much fairer and more acceptable? A total of £14 billion later, plus all the attacks on the low-paid, and the Conservatives now say that they care about what happens to people on low incomes. What a load of rubbish.

Mr. Clifton-Brown: Does the Financial Secretary recall saying in the Standing Committee on the Finance Bill, on which we both served, that the withdrawal of ACT credits was good for pensioners? How can the withdrawal of £22 billion-worth of tax credits be good for pensioners? Will she tell my constituents that?

Dawn Primarolo: I told the House and the Committee that we believed that it was for companies, not the

tax man, to take the decisions, and that we were withdrawing a distortion in the system, as the hon. Gentleman well knows.
What is all this about keeping promises? When the Conservative Government were in office, they could not spell the word "promise". In March 1992, the then Prime Minister said that the Conservatives have an allergy to tax. In fact, they have an allergy to telling the truth about tax, except for the hapless then Chief Secretary, William Waldegrave—he is no longer in the House—who said on the Dimbleby programme in 1996 that it was no secret that the Conservative Government, right back to 1979, had always said that they preferred to take tax off direct taxation and put it on to indirect tax and "all those other taxes". By that, he meant VAT.
What did the Conservative party say about that? How did it mislead the electorate? In January 1992, the then Conservative Prime Minister said that there would be no VAT increase. In March 1992, he said that his Government had no need to increase VAT and no plans to extend its scope.
In the normal candid fashion that we have come to expect from the right hon. and learned Member for Rushcliffe (Mr. Clarke), he said, when defending the imposition of VAT on fuel that it was "a perfectly fair tax". He also said that he had always thought that VAT had a narrow base and that it was worthy of reform. At one time he said—women were very pleased to hear this—that there were exemptions for children's clothes so that every woman with small feet would not have to pay tax on her shoes. Thank goodness for small mercies. I suppose that women felt secure with that statement.
However, by November 1993, the right hon. and learned Gentleman was saying that one of his options must be to extend the VAT base, and that the main candidates for that were food, children's clothing, transport, sewerage and newspapers, for all of which a powerful case could be made, but no amount of lobbying should put the Government off. The Conservative Government told the electorate one thing and did another.

Mr. Kenneth Clarke: I am glad that the hon. Lady still reads my speeches. If she reads on, she will see why I rejected that case in my Budget speech. While she is going back in history, will she explain to the House why, when we said at the last election that a Labour Government would raise taxation, it was so vehemently denied and why the Chief Secretary expressly denied that there was any intention of changing the tax relief for PEPs or TESSAs or for the pensions industry?

Dawn Primarolo: I am glad that the right hon. and learned Gentleman is in the Chamber, because I have another point to put to him. Perhaps when it comes to honesty and answering questions, he can explain why the 1992 Conservative manifesto said that the party would maintain mortgage tax relief, when, in December 1993, he said that, luckily, it had not said at what rate. What is that if it is not misleading the country? [Interruption.] Conservative Members do not like the truth. They want to make accusations, but they will not listen to their own record.
The right hon. and learned Member for Rushcliffe had it well sussed when he said in September 1996 that the public would be deeply suspicious of any tax cuts because


they would remember that the Conservative party had promised tax cuts and had not been able to deliver them. Instead, it delivered tax rises—£2,000 per family over the period of that Government.

Mr. Clarke: Will the Minister give way?

Dawn Primarolo: The debate has to finish at 7 o'clock—I am sorry. The right hon. and learned Gentleman—[Interruption.] The Government have cut taxes. We reduced VAT on fuel.

Hon. Members: Answer the question.

Mr. Deputy Speaker (Mr. Michael Lord): Order. The House must hear the Minister.

Dawn Primarolo: The Conservatives are hoping that the country will not be able to hear about their record. The Government have made tax promises and kept them: a winter fuel package for pensioners, a cut in corporation tax, help for small companies and a promise on energy-saving materials. We are helping the young and the long-term unemployed. We are about keeping promises and not breaking them. Next week, my right hon. Friend the Chancellor will be presenting to the House how the Government will continue to defend jobs, to invest in our economy and to ensure that our promises are kept—however much Opposition Members choose to heckle.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 174, Noes 298.

Division No. 196]
[7 pm


AYES


Ainsworth, Peter (E Surrey)
Clark, Dr Michael (Rayleigh)


Allan, Richard
Clarke, Rt Hon Kenneth (Rushcliffe)


Amess, David
Clifton-Brown, Geoffrey


Ancram, Rt Hon Michael
Collins, Tim


Arbuthnot, James
Cotter, Brian


Atkinson, David (Bour'mth E)
Cran, James


Atkinson, Peter (Hexham)
Curry, Rt Hon David


Baker, Norman
Dafis, Cynog


Baldry, Tony
Davies, Quentin (Grantham)


Ballard, Mrs Jackie
Davis, Rt Hon David (Haltemprice)


Beggs, Roy
Duncan, Alan


Bercow, John
Duncan Smith, Iain


Beresford, Sir Paul
Evans, Nigel


Boswell, Tim
Faber, David


Bottomley, Peter (Worthing W)
Fallon, Michael


Brady, Graham
Flight, Howard


Brand, Dr Peter
Forsythe, Clifford


Brazier, Julian
Forth, Rt Hon Eric


Brooke, Rt Hon Peter
Foster, Don (Bath)


Bruce, Ian (S Dorset)
Fowler, Rt Hon Sir Norman


Bruce, Malcolm (Gordon)
Fox, Dr Liam


Burnett, John
Gale, Roger


Burns, Simon
Garnier, Edward


Burstow, Paul
George, Andrew (St Ives)


Campbell, Menzies (NE Fife)
Gibb, Nick


Cash, William
Gill, Christopher


Chapman, Sir Sydney (Chipping Barnet)]
Goodlad, Rt Hon Sir Alastair


Chidgey, David
Gorman, Mrs Teresa


Chope, Christopher
Gorrie, Donald


Clappison, James
Gray, James





Greenway, John
Ottaway, Richard


Grieve, Dominic
Page, Richard


Gummer, Rt Hon John
Paice, James


Hague, Rt Hon William
Pickles, Eric


Hamilton, Rt Hon Sir Archie
Prior, David


Hammond, Philip
Randall, John


Hancock, Mike
Redwood, Rt Hon John


Harris, Dr Evan
Rendel, David


Harvey, Nick
Robathan, Andrew


Heald, Oliver
Robertson, Laurence (Tewk'b'ry)


Heathcoat-Amory, Rt Hon David
Roe, Mrs Marion (Broxbourne)


Hogg, Rt Hon Douglas
Ross, William (E Lond'y)


Horam, John
Rowe, Andrew (Faversham)


Howard, Rt Hon Michael
Ruffley, David


Howarth, Gerald (Aldershot)
Russell, Bob (Colchester)


Hughes, Simon (Southwark N)
St Aubyn, Nick


Hunter, Andrew
Sanders, Adrian


Jack, Rt Hon Michael
Sayeed, Jonathan


Jenkin, Bernard
Shepherd, Richard


Johnson Smith, Rt Hon Sir Geoffrey
Simpson, Keith (Mid-Norfolk)


Jones, leuan Wyn (Ynys Môn)
Smith, Sir Robert (W Ab'd'ns)


Jones, Nigel (Cheltenham)
Smyth, Rev Martin (Belfast S)


Keetch, Paul
Soames, Nicholas


Kennedy, Charles (Ross Skye)
Spelman, Mrs Caroline


Key, Robert
Spicer, Sir Michael


Kirkbride, Miss Julie
Spring, Richard


Kirkwood, Archy
Steen, Anthony


Laing, Mrs Eleanor
Streeter, Gary


Lait, Mrs Jacqui
Swayne, Desmond


Lansley, Andrew
Syms, Robert


Leigh, Edward
Tapsell, Sir Peter


Letwin, Oliver
Taylor, Ian (Esher & Walton)


Lewis, Dr Julian (New Forest E)
Taylor, John M (Solihull)


Lidington, David
Taylor, Matthew (Truro)


Lilley, Rt Hon Peter
Taylor, Sir Teddy


Livsey, Richard
Townend, John


Lloyd, Rt Hon Sir Peter (Fareham)
Trend, Michael


Llwyd, Elfyn
Tyler, Paul


Luff, Peter
Tyrie, Andrew


Lyell, Rt Hon Sir Nicholas
Viggers, Peter


MacGregor, Rt Hon John
Wallace, James


MacKay, Andrew
Wardle, Charles


Maclean, Rt Hon David
Waterson, Nigel


Maclennan, Rt Hon Robert
Webb, Steve


McLoughlin, Patrick
Wells, Bowen


Madel, Sir David
Whitney, Sir Raymond


Maginnis, Ken
Widdecombe, Rt Hon Miss Ann


Malins, Humfrey
Wigley, Rt Hon Dafydd


Maples, John
Wilkinson, John


Maude, Rt Hon Francis
Willetts, David


Mawhinney, Rt Hon Sir Brian
Winterton, Mrs Ann (Congleton)


May, Mrs Theresa
Winterton, Nicholas (Macclesfield)


Michie, Mrs Ray (Argyll & Bute)
Woodward, Shaun


Moss, Malcolm
Yeo, Tim


Nicholls, Patrick
Young, Rt Hon Sir George


Norman, Archie
Tellers for the Ayes:


Oaten, Mark
Mr. John Whittingdale and


Öpik, Lembit
Mr. Stephen Day.




NOES


Ainger, Nick
Beckett, Rt Hon Mrs Margaret


Ainsworth, Robert (Cov'try NE)
Bell, Stuart (Middlesbrough)


Alexander, Douglas
Benton, Joe


Allen, Graham
Bermingham, Gerald


Anderson, Janet (Rossendale)
Berry, Roger


Ashton, Joe
Best, Harold


Atherton, Ms Candy
Betts, Clive


Atkins, Charlotte
Blackman, Liz


Austin, John
Blears, Ms Hazel


Banks, Tony
Blizzard, Bob


Barnes, Harry
Blunkett, Rt Hon David


Battle, John
Boateng, Paul


Bayley, Hugh
Bradley, Keith (Withington)


Beard, Nigel
Bradshaw, Ben






Brinton, Mrs Helen
George, Bruce (Walsall S)


Brown, Rt Hon Gordon (Dunfermline E)
Gerrard, Neil


Brown, Rt Hon Nick (Newcastle E)
Gibson, Dr Ian


Brown, Russell (Dumfries)
Gilroy, Mrs Linda


Browne, Desmond
Godsiff, Roger


Burden, Richard
Goggins, Paul


Burgon, Colin
Gordon, Mrs Eileen


Butler, Mrs Christine
Griffiths, Jane (Reading E)


Byers, Stephen
Griffiths, Nigel (Edinburgh S)


Campbell, Mrs Anne (C'bridge)
Griffiths, Win (Bridgend)


Campbell, Ronnie (Blyth V)
Grocott, Bruce


Canavan, Dennis
Gunnell, John


Caplin, Ivor
Hall, Mike (Weaver Vale)


Casale, Roger
Hamilton, Fabian (Leeds NE)


Caton, Martin
Hanson, David


Cawsey, Ian
Harman, Rt Hon Ms Harriet


Chapman, Ben (Wirral S)
Healey, John


Chaytor, David
Hepburn, Stephen


Clapham, Michael
Heppell, John


Clark, Paul (Gillingham)
Hesford, Stephen


Clarke, Rt Hon Tom (Coatbridge)
Hill, Keith


Clarke, Tony (Northampton S)
Hinchliffe, David


Clwyd, Ann
Hoey, Kate


Coaker, Vernon
Home Robertson, John


Coffey, Ms Ann
Hope, Phil


Cohen, Harry
Hopkins, Kelvin


Coleman, Iain
Howarth, Alan (Newport E)


Colman, Tony
Hoyle, Lindsay


Cook, Frank (Stockton N)
Hughes, Ms Beverley (Stretford)


Cook, Rt Hon Robin (Livingston)
Hughes, Kevin (Doncaster N)


Corbett, Robin
Humble, Mrs Joan


Corbyn, Jeremy
Hutton, John


Corston, Ms Jean
Iddon, Dr Brian


Cox, Tom
Ingram, Adam


Cranston, Ross
Jackson, Ms Glenda (Hampstead)


Crausby, David
Jackson, Helen (Hillsborough)


Cryer, Mrs Ann (Keighley)
Jamieson, David


Cunningham, Jim (Cov'try S)
Jenkins, Brian


Dalyell, Tam
Johnson, Alan (Hull W & Hessle)


Darling, Rt Hon Alistair
Johnson, Miss Melanie (Welwyn Hatfield)


Davey, Valerie (Bristol W)
Jones, Helen (Warrington N)


Davidson, Ian
Jones, Ms Jenny (Wolverh'ton SW)


Davies, Rt Hon Denzil (Llanelli)
Jones, Jon Owen (Cardiff C)


Davies, Geraint (Croydon C)
Jones, Dr Lynne (Selly Oak)


Davies, Rt Hon Ron (Caerphilly)
Jowell, Ms Tessa


Davis, Terry (B'ham Hodge H)
Keeble, Ms Sally


Dawson, Hilton
Keen, Ann (Brentford & Isleworth)


Denham, John
Kelly, Ms Ruth


Dewar, Rt Hon Donald
Kennedy, Jane (Wavertree)


Dismore, Andrew
Khabra, Piara S


Dobbin, Jim
Kilfoyle, Peter


Dobson, Rt Hon Frank
King, Andy (Rugby & Kenilworth)


Donohoe, Brian H
Kingham, Ms Tess


Dowd, Jim
Kumar, Dr Ashok


Drew, David
Lawrence, Ms Jackie


Drown, Ms Julia
Laxton, Bob


Dunwoody, Mrs Gwyneth
Leslie, Christopher


Eagle, Angela (Wallasey)
Levitt, Tom


Efford, Clive
Lewis, Ivan (Bury S)


Ennis, Jeff
Liddell, Mrs Helen


Etherington, Bill
Linton, Martin


Field, Rt Hon Frank
Livingstone, Ken


Fisher, Mark
Lloyd, Tony (Manchester C)


Fitzpatrick, Jim
Lock, David


Fitzsimons, Lorna
Love, Andrew


Flint, Caroline
McAvoy, Thomas


Flynn, Paul
McCabe, Steve


Follett, Barbara
McCafferty, Ms Chris


Foster, Michael Jabez (Hastings)
McCartney, Ian (Makerfield)


Foster, Michael J (Worcester)
McDonagh, Siobhain


Foulkes, George
McDonnell, John


Fyfe, Maria
McGuire, Mrs Anne


Galbraith, Sam
McIsaac, Shona


Gapes, Mike
McLeish, Henry


Gardiner, Barry






McNamara, Kevin
Rooney, Terry


McNulty, Tony
Rowlands, Ted


MacShane, Denis
Ruane, Chris


Mactaggart, Fiona
Russell, Ms Christine (Chester)


McWafter, Tony
Ryan, Ms Joan


Mallaber, Judy
Sarwar, Mohammad


Mandelson, Peter
Savidge, Malcolm


Marek, Dr John
Sawford, Phil


Marsden, Paul (Shrewsbury)
Sedgemore, Brian


Marshall, Jim (Leicester S)
Shaw, Jonathan


Marshall-Andrews, Robert
Sheldon, Rt Hon Robert


Meale, Alan
Singh, Marsha


Merron, Gillian
Skinner, Dennis


Michael, Alun
Smith, Rt Hon Andrew (Oxford E)


Michie, Bill (Shef'ld Heeley)
Smith, Angela (Basildon)


Milburn, Alan
Smith, Rt Hon Chris (Islington S)


Miller, Andrew
Smith, Miss Geraldine (Morecambe & Lunesdale)


Mitchell, Austin
Smith, Jacqui (Redditch)


Moffatt, Laura
Smith, John (Glamorgan)


Moonie, Dr Lewis
Soley, Clive


Moran, Ms Margaret
Southworth, Ms Helen


Morgan, Rhodri (Cardiff W)
Spellar, John


Morris, Ms Estelle (B'ham Yardley)
Squire, Ms Rachel


Morris, Rt Hon John (Aberavon)
Steinberg, Gerry


Mountford, Kali
Stewart, Ian (Eccles)


Mowlam, Rt Hon Marjorie
Stinchcombe, Paul


Mudie, George
Stoate, Dr Howard


Mullin, Chris
Stringer, Graham


Murphy, Denis (Wansbeck)
Stuart, Ms Gisela


Naysmith, Dr Doug
Sutcliffe, Gerry


Norris, Dan
Taylor, Rt Hon Mrs Ann (Dewsbury)


O'Brien, Bill (Normanton)
Thomas, Gareth (Clwyd W)


O'Brien, Mike (N Warks)
Thomas, Gareth R (Harrow W)


O'Hara, Eddie
Timms, Stephen


Olner, Bill
Todd, Mark


O'Neill, Martin
Touhig, Don


Organ, Mrs Diana
Truswell, Paul


Palmer, Dr Nick
Turner, Dennis (Wolverh'ton SE)


Pearson, Ian
Turner, Dr Desmond (Kemptown)


Pendry, Tom
Turner, Dr George (NW Norfolk)


Perham, Ms Linda
Twigg, Stephen (Enfield)


Pickthall, Colin
Vis, Dr Rudi


Pike, Peter L
Wareing, Robert N


Plaskitt, James
White, Brian



Wicks, Malcolm


Pond, Chris
Williams, Rt Hon Alan (Swansea W)


Pope, Greg
Williams, Alan W (E Carmarthen)


Pound, Stephen
Williams, Mrs Betty (Conwy)


Prentice, Ms Bridget (Lewisham E)
Wills, Michael


Prentice, Gordon (Pendle)
Wilson, Brian


Prescott, Rt Hon John
Winnick, David


Primarolo, Dawn
Winterton, Ms Rosie (Doncaster C)


Purchase, Ken
Wise, Audrey


Quin, Ms Joyce
Wood, Mike


Quinn, Lawrie
Woolas, Phil


Radice, Giles



Wright, Anthony D (Gt Yarmouth)



Rammell, Bill



Wright, Dr Tony (Cannock)



Rapson, Syd



Raynsford, Nick



Reed, Andrew (Loughborough)



Reid, Dr John (Hamilton N)



Robertson, Rt Hon George (Hamilton S)
Tellers for the Noes:


Robinson, Geoffrey (Cov'try NW)
Mr. David Clelland and


Rooker, Jeff
Mr. John McFall.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House commends the Government for honouring its election promises not to increase the top or basic rate of income tax, to reduce VAT on domestic fuel to five per cent. and to introduce the levy on the windfall profits of the privatised utilities; approves the Government's determination to put in place a fair tax system, to encourage investment and long-term sustainable growth; believes that Britain's interests lie in the pursuit of sound economic policies that will benefit the many and not just the few, and which are in the long-term interests of the whole country; and urges the Government to reject any return to the boom and bust policies of the past which resulted in the 22 tax rises imposed by the previous administration.

Pensioners' Incomes

Mr. Deputy Speaker (Mr. Michael Lord): I have to tell the House that Madam Speaker has selected the amendment in the name of the Prime Minister.

Mr. fain Duncan Smith: I beg to move,
That this House notes with concern the Government's refusal to rule out means testing the basic state pension; believes the Government Actuary's advice to change the National Insurance rebates for those contracting out of SERPS is a direct result of the Chancellor's decision to abolish the ACT dividend tax credit in his July Budget, placing a huge burden on future pensioners, creating turmoil in the pensions market and confusion over pension reform; and calls upon the Government to apologise for devaluing long-term savings and creating fear amongst the most vulnerable members of society.
In the next few days, we shall have a chance to look at the Budget, so I do not intend today to trail our ideas about what it should contain. This debate is timely because it is important to consider what has happened in the past 10 months. The Secretary of State for Social Security and her hon. Friends have constantly told us that we cannot discuss matters in the Budget, but the national newspapers contain a series of leaks and discussions that will doubtless be denied as scurrilous rumours, but which seem to have a Government source.
Today, we must focus on pensions and the Government's record of the past 10 months—the impact that their policies have had and the changes that have been made—and ask whether pensions are safe in the Government's hands. The Government came to power giving mixed messages on pensions. On one hand, they said that they would protect pensions, while attacking the serious proposals that my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made at the last election for pension reform; on the other, they vaguely talked about a system of reform while allowing it to be suggested that they would means-test the basic state pension without denial.
It is therefore ironic that the first step that the Chancellor took on arrival at No. 11 Downing street was to put together an unnecessary Budget that aimed a blow directly at pensions and future pensioners.

Kali Mountford: I congratulate the hon. Gentleman on bringing this important debate to the Floor of the House. Does he agree that a decent society is to be judged by how it treats its very poorest pensioners?

Mr. Duncan Smith: A decent society is to be judged by the way in which the Government in power treat all members of society, including those who are considered most in need. If the hon. Member for Colne Valley (Kali Mountford) wants to know how that will be achieved, she should ask the Secretary of State how that chimes with leaks and suggestions that the basic state pension will be means-tested.
The attitude of mind behind the Budget is the same as that which has prevailed in the Labour party since time immemorial. Labour Governments have always believed that company profits are evil and unnecessary. As a result, they equate pension funds with profits and seek to


redistribute them as they see fit because they are of no use whatever. It is a case of new Labour, new redistribution; and new Labour, new tax.

Mr. Phil Hope: The hon. Gentleman said that this is an important debate. Will he explain why the hon. Member for West Chelmsford (Mr. Burns) is not going to wind up this evening's debate? Is it because he is not good enough, or because is he too good and the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) has dumped him because he is frightened that he will take his place on the Front Bench?

Mr. Duncan Smith: I know from that intervention that there is one person in the Chamber who is clearly not good enough. That was such a ludicrous, idiotic intervention that I shall not even bother to deal with it.
We have discussed endlessly the Government's position on pension funds and ACT dividend tax credits. Although the Government hoped and believed that they could somehow slip through the attack on pension funds unnoticed, it is significant that an increasing number of people are beginning to notice how damaging their actions were. A measure that raises £2.3 billion in 1997–98, £3.9 billion in 1998–99 and £5.4 billion in 1999–2000 from pension funds will have a huge negative effect on what pensioners will receive in future.
It is ironic that contrasts with what is in the Labour manifesto, which states:
We will support and strengthen the framework for occupational pensions.
The Labour Government have actually done a complete turn around and have attacked personal pensions and occupational pensions. A measure that is equivalent to putting 2p, 3p and 4p on income tax over the same period is hardly likely to protect those most in need, to whom the hon. Member for Colne Valley referred.
The effect has been to force schemes to increase the contribution rates payable—

Mr. Hope: Will the hon. Gentleman give way?

Mr. Duncan Smith: I have already given way to the hon. Gentleman. His absurd and idiotic intervention was not worth dealing with then; it is not worth dealing with him now.
Some schemes have already had to pass on those increases to their members. Many in the industry say that that practice will increase dramatically as they continue to pass on the effects. A number of schemes have also already cancelled benefit improvements; as we have heard, some schemes have even switched from final salary to money purchase. That point has not gone unnoticed and the Government have tried to deal with it by dealing with the SERPS rebate.
Let us consider one important example of the effects of the Government's changes to ACT dividend tax credits and their attack on the funds. A 30-year-old whose fund would have been worth £260,000 at age 65 would have to pay £1,000 a year to make up the shortfall that is a direct result of what the Government did in the last Budget.
Today, a report commissioned by the BBC showed that council tax will rise by twice the level of inflation—when in opposition the Labour party promised that would not

happen. I ask the House to reflect on what will happen in the next two to three years, as the effects of what has happened to pensions run by councils will begin to be felt. The effect will be to force council taxes to rise again and again. All that will occur as a result of the policies of a Government who, when in opposition, said that they would keep those taxes down.

Mr. John Gummer: Does my hon. Friend agree that those who are having to pay the extra £1,000 to put their own pension into proper funds will be the same people who are having to pay for other people—those who work for local authorities—to put their pensions into funds? Many employees will find that their employers are not prepared to make the extra money available for their pensions, but they will still be charged for the pensions of local government employees.

Mr. Duncan Smith: My right hon. Friend makes the point very powerfully. Either all those consequences went completely unnoticed by the Government at the time of the Budget or the Government hoped that they would go unnoticed by everyone who will have to make the extra contributions that my right hon. Friend has mentioned.
The cost will be passed on to local taxpayers. There is no such thing as a tax or a charge made on a company that does not go through to the consumer or taxpayer. The extra costs to businesses will flow as payroll taxes. On top of that, as we have heard today, the Government have got themselves into a bind over individual savings accounts. The Government's proposals for ISAs will compete directly with the same funds that people will want to put into pensions for long-term savings. There will be direct competition between short-term saving and long-term saving—that goes against the very reason the Government gave for introducing the new measure.

Mr. Desmond Browne: Is the hon. Gentleman aware that Bill Robinson, a director of the consultancy, London Economics, who was an adviser to Norman Lamont when he employed the same tactic of reducing ACT credit in his Budget, wrote an article entitled,"Taxing pension funds could be good for our health", which appeared in The Independent on 21 April 1997? That article stated:
There is room for argument as to the proper scale of the fiscal privileges accorded to the pension funds, but what is potentially damaging is that the privilege is limited to distributed profits.

Mr. Duncan Smith: We resisted the temptation to do that. While we are on this point, I must quote Hansard from 1993, in which the then Chancellor, Norman Lamont, said:
I propose to reduce the rate of tax on dividends from the current basic rate of 25 to the lower rate of 20 per cent. The effect of this, combined with the change to the tax credits, is to leave basic rate taxpayers neither better off nor worse off than they are now." — [Official Report, 16 March 1993; Vol. 221, c. 186.]
I think and I hope that that quotation will end the whole ridiculous argument so that Labour Members will leave the subject.

Mr. Chris Pond: Will the hon. Gentleman give way?

Mr. Duncan Smith: No, I wish to move on.
The key and the cornerstone to the issue—the biggest problem—involves SERPS. As the Government will remember, back in July Conservative Back Benchers warned the Government that their hasty consideration of such matters in the Budget would have a serious knock-on effect on those who had opted out or who were thinking of opting out of SERPS. I said that it was necessary to have an immediate out-of-sequence review to adjust the rebate, otherwise it would be devalued and people, particularly those in personal pensions, would eventually pull back into SERPS, increasing the Government's expenditure and exposure.

Mr. Pond: Will the hon. Gentleman give way?

Mr. Duncan Smith: No, I am making progress on this point.
The Under-Secretary of State for Social Security, the hon. Member for Southampton, Itchen (Mr. Denham), who is to wind up tonight's debate, will recall those comments because they were part of my winding-up speech in that earlier debate. I should be grateful if he would deal with the way in which he dismissed the points that I made and then, in November, was forced to call in the Government Actuary and ask for a review.
The Government Actuary's report is an absolutely damning indictment of Labour's first Budget for nearly 20 years. He said:
As a result of the proposed tax changes announced in the July 1997 Budget occupational and personal pension schemes (including appropriate personal pension schemes) are no longer able to reclaim tax credits on dividends payable by UK companies on equities which are held as scheme assets. This reduces the amount of dividend income from UK equities by just under 20 per cent. relative to the previous tax position".
The Government Actuary went on to make a number of points affecting personal pensions and occupational pensions, both salary related and money purchase. It is clear that, in his report, he assumes, quite rightly, a reduction of a quarter of 1 per cent. in the income from investments. That was obvious when the Chancellor sat down after giving his Budget speech.
I note that in today's Financial Times the leading actuarial consultant, Bacon and Woodrow, has said that the shortfall to those funds could be as much as £5 billion. That shortfall will be passed on directly to the companies and their pensioners. Bacon and Woodrow said:
It said the problem stemmed from lower than expected dividends, pushing many schemes below the minimum funding requirements (MFR) set out in last year's Pensions Act. Returns have been cut by the abolition of tax credits in last July's Budget and by soaring equity markets".
The point about the Financial Times article is clear: at the last Budget the Chancellor assumed that the funds were all in surplus and so were easy to raid. The Financial Times is now demonstrating that the Government's assumption that there was a never-ending gravy train of improving dividends was wrong. The returns are now lower; they are becoming closer to the minimum funding requirement, so decisions will have to be made on whether to stay inside salary-related schemes or to get out and move into either personal pensions or contracted-out money purchase schemes. The Government have forced pension funds, on which they said they were keen, to make changes that are likely to be for the worse.
When they were given the options by the Government Actuary, the Government chose to increase the personal pensions rebate and freeze the rebates on contracted-out occupational salary-related schemes. It is clear that the one area that got badly hit was occupational money purchase schemes. We know that the Government Actuary assumed—I hope that the Secretary of State will focus on this—that there was a reduction in the return on investment of a quarter of 1 per cent., which had a huge effect on the way in which those funds would be managed. When the Secretary of State accepted the Government Actuary's report and said that she would raise the rebate on personal pensions, she accepted that position. She accepted that, as a result of the Budget, there was a fall-off in the amount of money that the funds would receive from their investments.
The Secretary of State then took a decision to freeze the salary-related rebate. At the same time, she has accepted that there was a shortfall to income from investments. However, in her rationale for reducing the rebate amount for money purchase schemes, the Secretary of State has executed a complete about-turn. Her rationale for lowering the rebate on those schemes has simply been that there has been no change in the amount of investment income that they were receiving, and that they would have lower expenses. In the table that she has accepted, she has therefore done a complete about-turn.
I should like the Secretary of State to tell the House why she has hit so hard contracted-out money purchase schemes and those who have pensions in such arrangements. Why has she dealt them such a blow—for what specific purpose? Clearly, it has been done to save money for the Exchequer and from the national insurance fund. Her rationale in the report is extremely unclear.

Mr. Pond: A few minutes ago, the hon. Gentleman mentioned the Government Actuary, and he now mentions the cost to the Exchequer. Is he aware that, according to experts in the industry, the basic pension-plus scheme—which I believe he supported—would have cost the Exchequer very large amounts without providing any form of sustainable income for pensioners? Will he tell the House whether, as the Opposition spokesman, that is still his position? I see that the hon. Member for West Chelmsford (Mr. Burns) is shaking his head. I therefore assume that you are not in favour of that scheme. So this intervention—

Mr. Deputy Speaker: Order. The hon. Gentleman is not using correct parliamentary language.

Mr. Pond: I apologise, Mr. Deputy Speaker.

Mr. Duncan Smith: The hon. Member for Gravesham (Mr. Pond) really should wake himself up in the morning and remind himself that his party is now in government, not in opposition. I know that those points—that Labour is in government, and that those decisions have to be made—are very hard to bear, but the Government have been elected on the basis not only of protecting pension incomes but of developing reform proposals, with which we shall deal in a moment, but which are almost non-existent. The point that I was making—on which I thought he wished to intervene—was that my policy is to get into government at the next general election to sort out the mess that the Government have created.
The real issue is the extent to which the Government, after 10 months in office, already fear the likelihood of us getting back into government. I do not know whether my right hon. and hon. Friends have noticed it, but both in our earlier debate and in this one, Labour Members have spent their time asking what we will do when we are back in government. I certainly did not expect such fear after only 10 months in government—but never mind. We will now hear the reasons for their fear.
Ministers fear that they have been rumbled, and that the basis of the Government Actuary's report is an absolute indictment of the Government's Budget. The report demonstrates that the changes to the ACT dividend tax credit forced the Government to make an emergency call to the Government Actuary, who has had to examine and adjust the rebates. Ministers now say, "We cannot accept part of those recommendations, because what we really need to do is to save ourselves some money."
The Government have therefore done an about-turn, and basically accepted the logic of those who shouted the loudest—all the financial advisers on personal pensions, who said, "If you don't make this change, we'll drive them all back into SERPS." The Secretary of State has therefore bowed before that group. However, because others in the industry did not make such a noise, she has clawed back the money from those sources. That is the type of Government we have. The main blow to contracted-out money purchase and other schemes will fall directly on employers, and will subsequently be shuffled down to employees.
I see that the hon. Member for Doncaster, North (Mr. Hughes) is yawning. I know that he finds it difficult to stay awake for the Government. It is remarkable that, although he does not understand what is going on, he votes for it.
The Secretary of State made a reply to the actuarial report. When she said that she would have to raise rebates for personal pensions, she was asked whether she took a measure of the blame for her actions and those of the Chancellor. She said:
For individuals who have pensions with providers who take a rather less optimistic view of future investment returns there was a short term risk that they would be advised to contract back into SERPS.
Now she is blaming the advisers for being pessimistic, although they are bound by law to tell those investing in personal pensions, when the changes are made, that they should go back into SERPS. However, the Secretary of State wants to blame them for making those comments.
The Secretary of State went on to say:
This would not necessarily have been in the long-term interests of the individuals involved.
What she is really saying is that the Government panicked. She was saying, "It wasn't in our long-term interests. They were going to bust our Budget; so we had to do something about it." That is the reality.

Several hon. Members: rose—

Mr. Duncan Smith: We can now move on.

Mr. Hope: Will the hon. Gentleman give way?

Mr. Duncan Smith: No, I will move on. I have already given way to the hon. Gentleman.
Despite the much-vaunted statement that the Government will support and strengthen the occupational pension framework, Ministers have simply dealt a body blow to pensions generally. The significant part of the Actuary's report makes it quite clear that the Chancellor has proceeded, with stealth and in secret, to redistribute money from one part of the economy to another. However, without realising it, he has dealt a blow to the overall pension reform process. By creating the problem at the heart of the debate on SERPS, he has made it almost impossible for the Under-Secretary of State for Social Security to make progress in his reform programme. The hon. Gentleman shakes his head, but we are now 10 months into the welfare reform programme, and there is still no report on it.
Before the July Budget, I think that most hon. Members would have expected to hear more from the Minister for Welfare Reform, who had already examined the matter—I know, as I took great pleasure in reading many of his publications, as I am sure that the Under-Secretary of State for Social Security did; or perhaps did not—and, regardless of whether we liked them, we would have expected him to come up with a set of schemes that might have focused the Government on pension reform, getting them off to a flying start. If he had, perhaps we would have had something to debate by now. Instead, he was taken off the review, and his colleague was put on it.
At the heart of that ministerial change was the Budget's effects on SERPS. The Minister for Welfare Reform—who is on record as saying endlessly that SERPS has to go—suddenly discovered that the Chancellor had said in the Budget that SERPS must stay. He was subsequently taken off the review, and we will have to find some other way round the problem.
The Under-Secretary initiated a review that received 2,000 responses from industry. Although he closed that review, he almost immediately started another type of review—which received 171 responses by the time he closed it—because the responses to the initial review did not say want he wanted to hear.
There is therefore massive review fatigue in the industry. Every time industry answers a question from Ministers, it is asked another question. Ministers hope that, if they ask the industry ever more questions, they will eventually receive the answer that they wanted to hear initially. However, that should not really be surprising. The Government spent their time in opposition scurrilously attacking all aspects of pensions reform, and consequently did no thinking on the subject.
Across the country, Ministers have been scaring men and women not only about the basic state pension but about the state of their pension when it is time for them to retire.

Dr. Brian Iddon: Does the hon. Gentleman agree that this debate is rather academic for millions of pensioners across the country? I am talking about pensioners—thousands of whom live in my constituency—who are drawing the basic state pension. Does he accept that the basic pensioner is £22 a week worse off today than when the Conservatives were elected to government in 1979—after which they decoupled pensions from earnings and coupled them with prices?

Mr. Duncan Smith: I hope that the hon. Gentleman tells all those—not wealthy—people in his constituency


who made the effort to save money for their future and pensions that they are academic and irrelevant. They thought that their pensions—which the Government said that they would protect—were safe. I thought I heard him say—I wonder whether he is speaking on behalf of the Government—that the Government might be thinking about linking the basic state pension to earnings instead of to prices. Is he saying that the Government will do that?
The point is that the hon. Member for Bolton, South-East (Dr. Iddon) should be discussing everyone's savings and everyone's future—not trying to divide and attack one group. That is what the Government's actions amount to and what has happened since Labour has been in power. The Government have scared working men and women across the country.

Mr. Hope: Will the hon. Gentleman give way?

Mr. Duncan Smith: I tell the hon. Member for Corby (Mr. Hope) and other Labour Members that they have been asked the question that was at the heart of what the hon. Member for Bolton, South-East asked: what will happen to the basic state pension? There has been leak after leak about whether the Government will means-test it, or claw it back. We have even seen a report in a newspaper—I think it was The Sunday Times—that said that the Government would claw back a basic minimum income of £100 via a means test.

Mr. Browne: Will the hon. Gentleman give way?

Mr. Duncan Smith: No. I have already given way to the hon. Gentleman, and I want to make progress.
When the Secretary of State was challenged on the matter—I think that it was at Question Time—she said:
The hon. Gentleman should read our manifesto, which says that the basic state pension will continue to be paid universally, as it is now".— [official Report, 15 December 1997; Vol. 303, c. 5.]
I checked the manifesto, which, funnily enough, did not say that at all. It said:
The basic state pension will be retained as the foundation of pension provision. It will be increased at least in line with prices.
I do not know what my right hon. and hon. Friends think about that, but it does not sound to me like an absolute guarantee in regard to the basic state pension. It sounds a little like "Read my lips."

Mr. Browne: Will the hon. Gentleman give way?

Mr. Duncan Smith: I have given way to the hon. Gentleman already. He has had his moment in the sun.
We simply offer the Secretary of State an opportunity to support her hon. Friend the Member for Bolton, South-East in her very first words. Perhaps she will be able to answer his question, and even answer the question supported by the Liberal Democrat amendment. What will happen to the basic state pension? I think that that is a fair question: the Government can give a guarantee about that. If the Secretary of State does not want to rule out means testing, perhaps she would prefer to say that the Government are thinking about it. I am sure that every hon. Member will understand that she is caught against

the Budget, and cannot make commitments in one sense; but she can certainly rule out actions that the Government are not going to take.
So far, the Government have made a real mess of pensions. There has been chaos from the word go. Much of it started in the ridiculous position adopted by the Government during the last election, when they attacked any proposal for the reform of pensions. That continued into the Budget statement, when the Chancellor, in a moment of frenzy, attacked pension funds and drove a wedge into pension reform. He made it almost impossible for the Government to tackle the issue. That has created a problem right across the state earnings-related pension scheme. It has meant that the Government have had to arrange a special out-of-sequence review; it has meant that they have had to change policy in the space of 10 months. It has left people out there scared about their basic state pensions, scared about their pension funds and scared about what will happen to the pledges that were made at the time of the election.
The Prime Minister endlessly said that the Government would not raise taxes, but, since the Government took office, we have seen one tax raid after another. The most significant tax raid is the one that the Government have made on pension funds. That is the key. In 10 months, all that we have had is a record of broken promises and taxes increased by stealth. I can only say this to Labour Members: it is one sort of record to come to power and, in 10 months, to be tacking and weaving as though they were on their way out of power.
Perhaps that is what should happen. Perhaps that is why Labour Members are so scared. Perhaps that is why, throughout the last debate and, I dare say, during this debate, they have been more interested in knowing what we will do than in finding out what they have done themselves—which is to break promise after promise.

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
welcomes the Government's commitment to maintain the basic state pension as the foundation of pension provision and to uprate it at least in line with prices; welcomes the tough action which is being taken to ensure that victims of pension mis-selling are compensated; welcomes the action the Government has already taken in giving a Winter Fuel Payment to all pensioners with fuel bills to pay and fulfilling its promise to Britain's pensioners by cutting VAT on fuel to five per cent.; welcomes the Government's progress in developing pensions policy which will benefit today's and tomorrow's pensioners; welcomes the widespread consultation the Government is undertaking and notes that the Government's Pension Review has received over 2,000 submissions from pension providers, employers, trade unions, pension experts and pensioners' organisations; notes the widespread support for the Government's proposals for Stakeholder Pensions; and deplores the previous administration's policies on pensions, their imposition of VAT on fuel and their attempt to increase VAT on fuel to 17.5 per cent.
Labour Members always welcome the opportunity to debate pensions, and I commend the Opposition on their choice of debate, but I cannot extend that commendation to the speech of the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith). He had no positive proposals to make on pensions policy. Let me say in response to my hon. Friend the Member for Bolton,


South-East (Dr. Iddon) that the Opposition's current pensions policy is that they will be in government next time: that seems to be the extent of their policy.
The hon. Member for Chingford and Woodford Green said nothing about his Government's record, because they let pensioners down. Although that Government were comprehensively rejected by the British people—partly because of their record on pensions—all that the hon. Gentleman did was criticise the present Government for implementing the manifesto on which we were elected. Let me make the last Government's record clear, because it is the challenge that we now face. They failed pensioners: too many people in retirement are poor, as my hon. Friend the Member for Bolton, South-East made clear in his intervention. It is a scandal that, after a lifetime of work or caring for their families, pensioners are among the poorest people in Britain today. One in four pensioners must live on or below income support levels; 1.7 million must depend on income support; and a further 1 million who do not even claim the income support to which they are entitled live only on the basic state pension.
Inequality between pensioners has grown. The income of the bottom 20 per cent. of pensioner couples has risen by just £25 per week over the past 20 years, while the incomes of those at the top have risen by more than £160 a week.

Miss Julie Kirkbride: Is that wrong?

Ms Harman: The hon. Lady asks, from a sedentary position, whether that is wrong. We want to narrow the gap between the pensioners at the bottom and all the others by ensuring a better standard of living for pensioners at the bottom. Without action, that inequality is set to grow.
All pensioners were hit by the notorious Tory VAT on fuel. Pensioners' fuel bills soared when it was introduced at 8 per cent.; only the Labour party, the Liberal Democrats and pensioners themselves stood together to stop the Tories from raising it to 17.5 per cent. That is the last Government's record on pensioners. Nor did they establish a proper framework for pensions for the future; indeed, they made matters worse.

Mr. Browne: In a Budget debate, the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said:
The most important part of the Budget speech was the part that dealt with VAT on fuel. All hon. Members should welcome that announcement." —[Official Report, 30 November 1993; Vol. 233, c. 975.]

Ms Harman: The hon. Member for Chingford and Woodford Green has gone a bit quiet now. He has lowered his head, and is looking at his papers. Perhaps he can hardly believe that he said that.
It is clear that the key to security in retirement is a good second pension on top of the basic state pension. Now, however, millions of people have no such provision of their own, as they have had no chance to build up a good second pension. Many who did have good occupational pensions lost out when they were wrongly encouraged to opt out of those pensions into poor-value private personal pensions under the last Government.

Mr. Nick Gibb: Why has the Secretary of State decided to reduce

rebates for contracted-out money purchase schemes on the basis of an assumed 2.25 percent. rate of return on assets, when the Government Actuary recommends an assumed 2 per cent. rate of return?

Ms Harman: We have made our position clear, but I will deal with it further in my speech. We sought the advice of the Government Actuary. The hon. Member for Chingford and Woodford Green makes much of the review being out of sequence, but we are entitled to ask for the Government Actuary's advice when we consider it right. Is the hon. Gentleman saying that we should not have done that? I am sure he agrees that it was right for us to seek the advice. We did so, we acted on it and we published our draft statutory instruments.

Mr. Duncan Smith: Will the Secretary of State now tell us why the Government asked for the Government Actuary's advice?

Ms Harman: We asked for the Government Actuary's advice because we thought it proper to do so; that is what he is there for. We sought his advice and took appropriate action.[Interruption.] Conservative Members are engaged in diversionary tactics because they know that I am about to deal with the issue of pensions mis-selling. We were right to seek the Government Actuary's advice. We took appropriate action and published draft regulations.
Many people in good occupational pensions opted out, which proved disastrous. Hundreds of thousands of people who had previously had an index-linked pension to which they and their employer contributed were landed instead with a poor-value private pension that ate up £1 in every £4 of their hard-earned savings.
That had a terrible effect on those people's prospects for retirement. People on half average earnings who previously contributed to their company pensions, along with their employer, would have seen their pensions in retirement slashed from more than £130 a week to only £58 a week.
Having caused the scandal of pensions mis-selling, the Tories failed to take action to compensate those who lost out. The hon. Member for Chingford and Woodford Green asked us to account for what we have been doing on pensions in government. My Department and the Treasury have been sorting out the scandal of those who were mis-sold personal pensions and whom the Tories failed to compensate. By the time of the general election, fewer than 2 per cent. of those who had been mis-sold personal pensions had been compensated, and 18,000 people died before getting any form of redress. It has been left to this Government to ensure that people are properly compensated.
My hon. Friend the Economic Secretary has pressurised the companies that mis-sold personal pensions; that pressure continues and is paying off. Figures published today by the Personal Investment Authority show a respectable increase in the effort to get compensation to the victims of pensions mis-selling, with a thirteenfold increase in the number of people compensated compared with this time last year. I want to thank my hon. Friend for that progress.
We will press on, bringing justice to those whose pensions were ripped off by the Conservative Government.

Mrs. Teresa Gorman: The Secretary of State has made comments about whether people were wise to come out of the state earnings-related pension scheme. The Minister for Welfare Reform said, at column 197 on 11 December 1997, that SERPS was "a pay-as-you-go scheme" and that he proposed to give people a better stake in their pensions by using the private sector.

Ms Harman: Indeed, we made it clear in the manifesto that we want people to have a stake in their pensions. That is why we are introducing and consulting on the stakeholder pension in addition to the basic state pension.
Despite the Conservative Government's record, the hon. Member for Chingford and Woodford Green criticised this Government's record on pensions, and in particular the effect of last year's Budget. He spoke at length about the Budget, but said absolutely nothing new. He has made his sole point—it is not a good one—many times before, in written and oral questions, and he will continue to get the same answer. Let me try once again to explain the position to him.
My right hon. Friend the Chancellor has made it clear that he believes that we must take action to strengthen the economy for the longer term. The only way in which to build an economy that can pay decent pensions in the future is by providing stability and growth, today and in the future. That requires high levels of long-term, high-quality investment, such as we have not seen before.
The Budget was designed to create the right conditions. It committed us to prudent spending, sound fiscal policies and cuts in corporation tax. We removed a bias in the tax system that discouraged long-term investment. Because the Budget was good for investment, good for companies and good for the economy it will be good for the ability of the economy to sustain pensions in the long term.

Mr. Simon Burns: Will the Secretary of State give way?

Ms Harman: I did not know that the hon. Gentleman was allowed to speak in this debate. If I give way to him, he can explain why he is not winding up tonight's debate.

Mr. Burns: As always, I am extremely grateful to the Secretary of State. I want to ask her one simple question. Will she do me the courtesy of giving me a straightforward yes or no answer? As she develops her theme, will she please tell the House, and the hon. Member for Bolton, South-East (Dr. Iddon), whether the Government will restore the link of the basic state pension to earnings or keep it linked to prices?

Ms Harman: I will deal with the value of the basic state pension later. Perhaps the hon. Gentleman can give a yes or no answer to the question why he is not winding up this debate—yes or no?

Mr. Burns: Before the situation gets out of hand, let me explain that, as the Secretary of State knows from

Question Time and from numerous debates, I have concentrated on welfare reform, while my hon. Friend the Member for Grantham and Stamford (Mr. Davies) has done a great deal of work on pensions, so it is only right that he should wind up this important debate tonight.

Ms Harman: If the hon. Gentleman listens to the debate, he may learn more.
We are increasing the rebates for appropriate personal pensions to ensure that contracting out remains attractive. The hon. Member for Chingford and Woodford Green asked about the advice of the Government Actuary. As I have already said, we sought and considered that advice, and last Wednesday we laid orders to increase the rebates.
The Government are taking, and are determined to continue taking, the long-term view of the economy and of pensions. That is the right approach to developing a pensions policy that can provide a secure retirement for all tomorrow's pensioners as well as today's.
The future of pensions policy is at the heart of the reform of the welfare state. When we set out the case for reform at the beginning of the year, we said that a welfare state fit for the 21st century had to extend opportunity and security to all. We said that individuals have a responsibility to provide for themselves when they can do so and that society has a responsibility to help those who cannot.
Those are the principles that underpin our pensions reform. We are determined to build a pensions system that provides a secure retirement for all pensioners: for today's pensioners as well as tomorrow's; for people on low or modest incomes as well as those on good salaries; and for women and carers as well as male breadwinners.
The system must balance fairly the responsibilities of the state and the individual, and the public and private sectors. In the past 10 months, we have made substantial progress in both providing for today's pensioners and developing a framework for pensions provision.
Pensions policy has to provide long-term security; people may contribute to their pensions for 40 years and be in retirement for more than 20 years. Pensions reform has to begin with debate, unlike the previous Government's pension plus scheme, which began on the back of an envelope. Our reform will begin with a wide-ranging debate, as it must be the product of consultation and build on broad support, because pensions reform has to last.

Mr. Desmond Swayne: Will the Secretary of State give way?

Ms Harman: I want to make some progress, so I may give way to the hon. Gentleman later.
Only two months after coming into government, I announced a wide-ranging review, led by my ministerial colleague, my hon. Friend the Member for Southampton, lichen (Mr. Denham), fulfilling another manifesto promise, to build a sustainable consensus on the future of pensions policy. We set out 10 challenges that the review needed to address. We have not heard one word from the hon. Member for Chingford and Woodford Green about whether he thinks that they are the right challenges or how we should meet them. He has nothing to say on the subject.
We have a pensions system that serves some people extremely well, but fails too many, so we have to find ways of enabling those who lose out to get a better income in retirement. We must tackle the growth in pensioner inequality, including the growing inequality between men's and women's incomes in retirement. We have encouraged debate, and have consulted widely. We have received more than 2,000 responses to the pensions review from pension providers, the Confederation of British Industry and employers, trade unions, pensions experts and pensioners, and we have given the National Pensioners Convention, led by Jack Jones, a specific and central role in our review.
Officials, my hon. Friend the Under-Secretary, my right hon. Friend the Minister of State and I have met the National Pensioners Convention a number of times to ensure that the views of pensioners are heard at the heart of government. But the debate about the future of pensions must be better informed than it can be with the current available information. That is why, as part of the pensions review, we have set up for the first time an independent pension provision group, which is chaired by Tom Ross, to whom we are grateful, to provide an authoritative analysis of the current state of pension provision and likely trends. The group will report shortly, and will make an important contribution to the debate on pension reform.
Some of the fundamentals are already clear. Our pensions system has not kept up with the social and economic changes that have transformed the working and family lives of men and women over the past 50 years. The world of work has changed; it is no longer characterised by large numbers of men working for large employers, secure in the knowledge that their jobs are for life and bring with them a family wage and a pension for them and their wives when they retire.

Mr. Keith Simpson: The Secretary of State is describing the problem.

Ms Harman: It is a problem that we inherited from the previous Government. The world has changed, but pensions policy failed to respond, and those changes clearly passed the hon. Gentleman by.

Mrs. Gorman: Will the Secretary of State give way?

Ms Harman: I have already given way to the hon. Lady.
Occupational schemes provide, and will continue to provide, the best form of second pension, particularly because in most cases the employer, as well as the employee, contributes towards the pension.
We want further to strengthen the framework of occupational pension provision, and encourage more people to join an occupational scheme when one is available. However, more and more working men and women do not have access to an occupational pension, because the best employer schemes are generally in the parts of the economy where employment has been shrinking—large private sector companies and the public sector. More people work for small and medium firms which are less likely to offer an occupational pension.
In the modern world of work, more men and women change jobs regularly, and are employed on temporary or short-term contracts. That is the background against

which we have to work. More people are on the borders between employment and self-employment, and have no guarantee of regular work. Nowadays, two out of three women work, and it is expected that women will account for three quarters of the increase in the work force by 2006.
Mothers form a growing proportion of the work force, and many of them want more flexible working patterns, which is one reason why one in five employed people work part time. Over the past 50 years, there have been profound changes in work and family patterns, but while the world of work has changed dramatically, the pensions system has not.

Mrs. Gorman: Will the Secretary of State give way?

Ms Harman: I have already given way to the hon. Lady; I shall not give way to her again.
Millions of people work in ways that are not catered for by the existing pensions system: their employer does not provide an occupational pension; their income is not high or stable enough to make personal pensions a good deal; and some of them, mainly women, may not even contribute to their basic state pension because, although they work, their earnings fall below the national insurance lower earnings limit.
Without action being taken on pensions, those millions of people will face the prospect of dependence on means-tested benefits in retirement, and the gap between those who have access to a good occupational or personal second pension and the millions who do not will widen. That is unacceptable.
Our welfare-to-work reforms will help people into work, and our pensions reforms will help people in work to save for their retirement. We are working on plans for stakeholder pensions, and consulting on the technical detail to which the hon. Member for Chingford and Woodford Green referred, to help people who do not have access to an occupational pension for whom there was no provision under the previous Government.
We want secure, flexible, value-for-money pensions for people on low or intermittent incomes, many of whom are women. Not only is consensus growing about the nature of the problem, but there is increasingly broad agreement about the solution. I have been encouraged by the consensus about the need for and shape of new, value-for-money second pensions which has emerged from our recent consultations on stakeholder pensions.
Stakeholder pensions must offer excellent value for money, and can do so by making economies of scale through pooling savings in multi-member schemes and adopting low-charging regimes. They must be simple to regulate and easy to understand, and they must be available to the self-employed. Our pensions policy is starting to fill some of the gaps left behind by the previous Government who left people heading for their retirement without a good second pension.
We must provide security in retirement for people who are contributing to society, not through paid work but through their caring responsibilities. Carers, most of whom are women, are unable to save for their pension, and if pensions that are designed to meet their needs are not available—under the previous Government, there was


none—they face poverty and dependence on means-tested benefits in retirement. For example, a woman from West Yorkshire contacted the Carers National Association.

Mr. Gibb: Will the Secretary of State say, once and for all, whether the Government will means-test the basic state pension—yes or no?

Ms Harman: I am dealing with the citizenship pension for carers, and will address the hon. Gentleman's point when I come to the basic state pension.
A woman from West Yorkshire contacted the Carers National Association. She had worked in a supermarket since she was 20, and had an occupational pension into which she and her employer had paid. When the woman was 50, her mother, who was in her 70s, had a stroke, so the woman gave up her job to care for her. She has lost 10 years of her and her employer's pension contributions, and fears that in retirement she will end up like her mother—on income support.
That woman, and people like her, deserve a secure and dignified retirement, and a pension in their own right on top of the basic state pension, so we are exploring plans for a citizenship pension to enable all carers to enjoy a decent and dignified retirement.

Mr. Steve Webb: I have been studying the Government's pension reforms, and stakeholder pensions have received huge attention. There has been a massive consultation exercise on them, but citizenship pensions, rather like the people they are provided for, are the poor relation. The Secretary of State was questioned by the Social Security Select Committee on citizenship pensions, and her answer was hesitant and unclear. Does she accept that no progress has been made on the issue?

Ms Harman: There has been extensive consultation. The hon. Gentleman and his party have been consistent advocates of such pensions. I assure him that we are making progress, and that citizenship pensions have by no means dropped off our pension reform agenda.
The Government are already tackling key issues in developing a fair and lasting pensions policy for the future, but we are also taking immediate action to fulfil our commitment to help today's pensioners. Our manifesto made it clear that we would maintain the basic state pension as the foundation for pension provision, and that we would uprate it at least in line with prices. We have fulfilled our commitment and have increased the basic state pension for all pensioners, so that from next month the basic state pension for a couple will exceed £100 for the first time.
Pensioners spend a greater proportion of their income on fuel than other households, so we have taken a wide range of action to help them to afford to keep warm during the winter. We have cut pensioners' fuel bills by cutting VAT on fuel to 5 per cent., and have reduced the gas levy to zero. For the first time—

Mrs. Gorman: None of them has been paid.

Ms Harman: The hon. Lady says that none of them has been paid. What we are talking about is the cut in VAT on gas and electricity, which certainly has happened and which would not have happened had we not been in government.

For the first time, all pensioners are getting help with their fuel bills through winter fuel payments.

Mr. Burns: Some are still waiting.

Ms Harman: We made it clear that we would pay out first to the poorest pensioners—those on income support. All the poorest pensioners have been paid.

Mr. Burns: Will the right hon. Lady clarify the phrase "all the poorest pensioners", which she keeps using? Nobody who becomes a pensioner from 6 January this year will receive a penny this year.

Ms Harman: For 18 years, nobody, whenever he or she retired, got a winter fuel payment. The hon. Gentleman knows that, when a payment is provided, there has to be a cut-off point somewhere. The difference is that this Government are paying money to help pensioners with their fuel bills, whereas under the previous Government pensioners had to pay money to the Government to help them with their financial problems.

Mr. Burns: Will the right hon. Lady tell the House the cut-off date for the Christmas bonus?

Ms Harman: That is a routine payment, which is paid every year.

The Minister for Welfare Reform (Mr. Frank Field): Christmas is 25 December.

Ms Harman: My right hon. Friend says that Christmas is 25 December. The hon. Member for West Chelmsford (Mr. Burns) wants to make a huge point about the administration, but the fact is that we are paying every single pensioner extra money to help with his or her fuel bills. For the first time, all pensioners are getting help with their fuel bills through winter fuel payments. Some of Britain's poorest pensioners—the 1.5 million pensioners who are on income support—received their winter fuel payment of £50 in January. They have all been paid.

Mr. Terry Rooney: Is my right hon. Friend aware that, during the 18 years of the Conservative Government, 9.5 million people retired and every single one was worse off as a result of the policies of that Government?

Ms Harman: My hon. Friend makes a good point.
Last week, the first of more than 8 million pensioners received their winter fuel payment, as we started to pay £20 to all other pensioner households. All pensioners should receive a payment by the end of the month. Conservative Members may deride that policy, but people think that it is fair and just that one of our priorities, as promised in our manifesto, is to get help to all of today's pensioners, especially the poorest. We said that, as a priority, we would get help to today's poorest pensioners and we are delivering on our promise.
We are concerned about the very poorest—the people who are not claiming income support even though they are entitled to it. We are carrying out research to establish why up to 1 million pensioners do not claim the income support to which they are entitled. We have made it clear that the


Government believe that people who are not entitled to benefit should not get it, but we also believe that those who are entitled to benefit should get it.
When we were in opposition and when the House debated what became the Social Security Administration (Fraud) Act 1997, I repeatedly pressed the Tory Government to use the new computers and data-matching powers not only to catch fraudsters—important though that is—but to identify pensioners who were falling through the net.

Mr. Field: They would not do so.

Ms Harman: My right hon. Friend is right. The previous Secretary of State for Social Security, the right hon. Member for Hitchin and Harpenden (Mr. Lilley), refused to do that. He said that the poorest pensioners chose not to claim the money, because they did not want it. He said that, if the Government attempted to identify them, they would be found guilty by the European Court of Human Rights, so they could not possibly do it. We are not that frail. The right hon. Gentleman refused to recognise that, although those pensioners might need the money, they might not know that they were entitled to it, or that they might know that they were entitled to it, but be too proud to claim it.
That was wrong and now that we are in government we are taking action to carry out our manifesto promise of getting help to the poorest pensioners. Today, I can announce that we are investing £15 million in nine new pilot exercises to find the best ways of getting help to pensioners who do not claim their income support. Those pilots will start next month in Glasgow, Preston, York, Lambeth, Torbay, Stroud, South Staffordshire, Torfaen and East Renfrewshire.
We already hold numerous records and data on the people whom we are trying to help. Most are on record at the Contributions Agency as being entitled to the basic state pension and many are on record at the Benefits Agency because they receive other social security benefits such as attendance allowance, housing benefit and council tax benefit. At the moment, that information is just lying there, on different computer systems, but we will use that information and our data-matching powers to identify those pensioners who are missing out. Under those pilots the Benefits Agency, the Contributions Agency and local authorities in the nine areas will work together to find the best ways of getting the money to those poorest pensioners.

Mr. Vernon Coaker: I congratulate my right hon. Friend on that announcement. May I ask her to do as much as she can to accelerate the pilot projects and get them finished quickly, so that what is learned from them can be extended to the rest of the country as soon as possible?

Ms Harman: We shall report back to the House on how the projects work, but we can all agree that those who have gone without are the poorest people in society. The information on how to help them has never been used before, so this pioneering and innovative measure is long overdue.
We are modernising the social security system to tackle social and economic inequality and to tackle poverty. That is a promise on which we were elected. Not only do

the new Labour Government take a different approach to the objectives of pensions policy from their predecessors; they take a different approach to developing that policy so that we get it right.
That is why we shall publish our proposals on pensions and the conclusions of our pensions review, so as to enable a full and well-informed debate and to get it right. That is why our proposals on pension sharing on divorce will be set out in draft Bill clauses, which will be published in advance of introducing them into the House, so that they can be examined by, among others, the Select Committee on Social Security. In that way, we can consult with and draw on the advice of others and so get it right.
Our principles are clearly established and now we have established the practice of open consultation in order to improve the quality of the draft legislation that comes before the House for consideration. Reforming pensions provision is at the centre of reforming welfare and we have already made substantial progress along the path of pensions reform.

Mr. Edward Leigh: I was delighted when the Secretary of State said that we had to proceed by consent. In my brief contribution, I shall echo that point of view. Pensions are far too serious a subject to be the plaything of party politics.
The parties on both sides of the House have apologies to make. I shall start by making an apology on behalf of the Conservative party: there undoubtedly was a serious problem of pension mis-selling in the 1980s. I doubt whether that was the fault of Conservative Ministers or Back Benchers, but the problem occurred and the Labour Government are right to address it. In turn, the Government should make an apology for their abolition of ACT which, as my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) made clear, will cost pensioners up to £5 billion. That sends entirely the wrong message. As I have said, if we are going to make any headway at all, we have to proceed by way of consent and cross-party support.
The Secretary of State for Social Security is right to say that the pension system is failing many people. It has become almost a cliche, but work patterns are changing and, for the first time, there has been a worrying dip in the number of people who take out occupational pensions. Our pension industry faces a serious crisis.
Since the second world war, we have had a record second to none in persuading people to take out occupational pensions. A total of £600 billion is invested, but work patterns are changing. The Secretary of State is right to say that there is a particularly worrying trend with women workers, whose contributions are often not sufficient.
All that leads me to suggest that there must be cross-party consensus that, with the end of the link with earnings, the basic state pension, which for 50 years has been the pride of the welfare state, is no longer adequate. It is no longer adequate in our age; it will certainly not be adequate by the middle of the next century. That is a worrying development because people have been taught to rely on the basic state pension. They can no longer do so.
There is no point in hurling insults across the Chamber. The fact is that neither party, whichever is in government, is going to restore the link with earnings because we


simply cannot afford to do so. Therefore, the basic state pension is going to decline, is declining in terms of real value, is not sufficient and will be even less sufficient for our elderly population.
Two nations are emerging. Many of us enjoy an excellent occupational pension in the House, if we are fortunate to survive for enough years. One nation enjoys first-rate occupational pensions; another does not and is condemned to an old age of poverty and reliance on income support. That is not acceptable in a civilised society.
Surely that point is, or should be, accepted by hon. Members on both sides of the House, but what do we do then? Obviously the Secretary of State is right. We have to create a stakeholder society, to use her jargon. There is nothing wrong with the phrase. She coined it, but there is no reason why we should not adopt it. That was precisely what my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the former Secretary of State for Social Security, now the shadow Chancellor of the Exchequer, was trying to do before the general election. He was trying to encourage people to make provision for their old age.

Mr. Hope: The hon. Gentleman gives the impression that there is cross-party consensus. Does he agree that the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), the Opposition Front-Bench spokesman, said nothing about pensioner poverty, about extra payments to pensioners or about the Conservative Government's failure to do anything to assist pensioners who live on or below the poverty line? Does the hon. Member for Gainsborough (Mr. Leigh) agree that we have inherited a legacy of pensioner poverty, which has caused millions of people throughout this country enormous distress?

Mr. Leigh: It is precisely that sort of pointless party political intervention that does not help pensioners one bit. The hon. Gentleman made an utterly ludicrous intervention at the beginning of the speech of my hon. Friend the Member for Chingford and Woodford Green. What is the point in saying that? How will that help pensioners?
Let us return to the real debate. The fact is that the basic state pension is not adequate. What are we going to do about it? Before the general election, my right hon. Friend the Member for Hitchin and Harpenden proposed an idea, a concept. The trouble is that it was launched almost exactly a year ago, on 6 March 1997, when we were in the midst of pre-electoral tension. Frankly, there was no proper debate about his sensible proposals. All he was saying was that people—all people—should be encouraged and required under the basic pension plus system to put a proportion of their income into a private insurance company to provide for their old age.
That idea clearly was not acceptable to the Labour party in that pre-election period. Perhaps it is not acceptable now. However, there is a compromise that hon. Members on both sides of the House may be able to accept. I know that Chile is a dirty word to many Labour Members, so I do not want to go on and on about it, but I could mention Singapore if that makes life easier for them. Consensus is

surely emerging throughout the world that, if we are to provide sensibly for all old people, we must proceed not down the pay-as-you-go route, but down the stakeholder pension route.
Whether we support the Chilean model, by which people are required to put 10 per cent. of their income into a highly regulated, albeit private, insurance system, or the Singaporean model, where people do the same, but pension funds are effectively controlled and run by the Government, all we can do is give pensioners the choice. We have to require them to put a proportion of their income into a pension plan.

Mr. Howard Flight: There is a crucial difference between the two models. The returns achieved by Singapore have totalled only some 2.5 per cent. because the investment has been state controlled, whereas the returns achieved by the Chile funds have been substantially larger. If it is a compulsory state-run system, there is a huge issue as to how the money is used.

Mr. Leigh: I fully accept my hon. Friend's point. The initial enthusiasm of the Secretary of State for Culture, Media and Sport—when he was the social security shadow spokesman—for the Singaporean system was tempered by the relatively low rate of return that the Singaporean Government managed to achieve, even though it is a successful and highly regulated society, so my hon. Friend makes a fair point.
All I say is that I fear, because we are not at present in government, that there is no enthusiasm on the Treasury Front Bench to proceed down the Chilean route. When the Select Committee on Social Security visited Chile before the last election, led by its then Chairman, now the Minister for Welfare Reform, it took some interesting evidence. Generally, we were impressed by the Chilean experience. We were particularly impressed by the rate of return and by the fact that, because the system is so highly regulated, there has been little abuse, although there has been a certain amount of abuse with people chopping and changing between different pension schemes. However, as it is highly regulated, they do not personally lose out.
The Government are not going to move down that road immediately because that would go against all their instincts. I understand that, but surely we can give people at least the choice, either to invest in private pension plans or, if that is unacceptable to them, to invest in pension schemes that are run by mutual or friendly societies.
I understand that pension schemes that are run by mutual or friendly societies may be more acceptable to the Government than private insurance schemes, but, whatever system we adopt, we cannot dictate to people how they should plan for their retirement. We have to give them the choice. What we surely have to do as a nation is find some way—this will take not one or two Parliaments, but perhaps five, 10, 15 or 20 Parliaments to achieve—that hon. Members on both sides of the Chamber can support, to encourage and require everyone, whatever the nature of their work pattern, however many times they change jobs, and whether they are men or women, to provide adequately for their old age. If we do not, we are storing up for this country the most profound and agonising social turmoil that it has encountered for many years.

Kali Mountford: This has been an intriguing debate so far. At the beginning of the debate, I thought, "This is typical. It exemplifies the difference between Labour and Opposition Members." Following the speech by the hon. Member for Gainsborough (Mr. Leigh), I am even more intrigued. We continue to talk about the second pension route, but I was intrigued especially by the hon. Gentleman's remarks about pensioner poverty. I want to concentrate today on pensioner poverty, and stability and security in old age. I agree that we need a second pension, but that is for the future—the young people of today and how they supply the resources to provide security for themselves in their old age. One thing that will not give them security is a scheme that pulls the rug from under them by taking away the security of a basic state pension. Most of the suggestions from the Conservative party when it was in government gave the impression that it would pull the rug away from pensioners.

Mr. Flight: Will the hon. Lady give way?

Kali Mountford: I hope that the hon. Gentleman is going to illustrate that point.

Mr. Flight: The policy proposed before the general election involved a state guarantee equivalent to the state pension. The crucial issue was that the returns on private sector investment could be considerably greater than the returns within the state system. It was not proposed to remove the guarantee of the amount of the state pension.

Kali Mountford: We are going down an old path here. We have discussed this before in the debates on the Finance Bill and subsequent debates about social security. The perception of voters and my perception of basic pension plus was that once one was out of the system, there was no way back in. That created real fear for voters. We have to take that fear away.
Security in retirement is an absolute need. Another absolute need is freedom from poverty. I am delighted with what I have heard from my right hon. Friend the Secretary of State this evening. The use of the technology of today to provide security for a new age has to be the right approach. Many people have an income below the level of income support. That is real and abject poverty. There is a generation gap which is important both to the provision of second pensions and to the provision of pensions today. The poorest people are those aged over 75, of whom 40 per cent. have an income below the level of income support. That generation of people is least likely to claim the benefits to which they are entitled. They live in the most real poverty of all. Whichever group of poor people we discuss, those are the people about whom I am most concerned. They are physically vulnerable and they are proud of their traditions. We have to find the right way in which to ensure that they claim that to which they are entitled. One way in which to do that, which is a correct way, is to ensure that they do not pay over the odds for basic needs. So let us have a look at VAT on fuel.
Pensioners will have been disappointed in Conservative Members, such as the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), who welcomed the

previous Chancellor's proposal to increase VAT on fuel to 17.5 per cent. Let us remember that it was the Labour Opposition who beat down that proposal. The Chancellor at that time decided to fill the gap in his Budget, which was created when the House voted against his proposal, by reducing the increase in the state pension by 30p. How did that meet the expectation of proper state support through the basic state pension? That illustrates the difference in the priorities of the Labour Government and the Conservative party when it was in government.

Mr. Hope: Is my hon. Friend aware that the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said in the House of the increase in the state pension age:
The equalisation of the state pension age at 65—again a change that we proposed in August—is welcome, but the Government should look again at increasing it, in due course, to 67 because the average age is rising."? — [Official Report, 30 November 1993; Vol. 233, c. 978.]
If that had happened, some 2.4 million pensioners would have lost out.

Kali Mountford: Sadly, I am not surprised to hear that, although I am disappointed. The demographic changes in society present a problem and imagination has to be used to solve it. We have an aging population with growing needs, but a simplistic approach is not the answer. One simple answer that needs to be understood is that people who need benefits sometimes need to know the route to those benefits. That is why VAT on fuel is so important and why I welcome the reduction in VAT on fuel. I expect that Conservative Members were disappointed in it, given that they welcomed the opposite when their party was in government.
Let us consider the effect of reducing VAT on fuel, blunt instrument though it may be. It allows pensioners to keep their heating on in the winter. Help the Aged reported that pensioners were having to make decisions between food and fuel. That is why it welcomed the introduction of the £20 and the £50 for fuel this winter—another blunt instrument, but a blunt instrument that gets to the point. If pensioners have to wait for weeks on end to see how cold it gets to find out whether they will be entitled to extra support, it makes life very difficult for them, especially as the rules in relation to income support and cold weather payments were complicated. At least this winter—it has been a mild winter—pensioners have had the cash to pay their heating bills without all that rigmarole. That is important.
Our aging population faces some difficult issues and problems. A group of pensioners came to see me on Saturday. They brought me a letter from their pensioner action group about what they thought was most important. They wanted to see an increase in the basic state pension; there is no surprise in that. So they would have been disappointed by the previous Chancellor's reduction in the increase.

Mr. Gibb: Did those pensioners request that the hon. Lady's Government means-test the basic state pension? If not, why is the hon. Lady not asking the Secretary of State to confirm whether she intends to means-test it?

Kali Mountford: The issue of means-testing was not raised by that group of pensioners. They concentrated on


some rather more interesting issues, such as why they had so much difficulty with care in the community, why they could not get into the private residential homes that used to be in local authority control and why they found it so difficult to get access to the national health service, which they felt that they had paid for and the previous Government had eroded.

Miss Kirkbride: I wonder whether the hon. Lady explained to her pensioners why her Labour Government, who pleaded so much on behalf of poor pensioners, were not prepared to restore the link with earnings.

Kali Mountford: The hon. Lady obviously has not been listening to the debate. After 18 years of Tory government and the erosion of the basic state pension, we have a long way to go from a low base. A great deal of imagination is needed. The most important people are those on incomes below income support level. The point of income support is that it marks the point of poverty. If people are below that point, they are making difficult choices in managing their families' budgets. To keep harping on this issue, which misses the point about pensioners, does them no favours at all.
We need to make decisions about our priorities. Conservative Members keep talking about actuaries and private pension funds—

Mr. Gibb: No, about SERPS.

Kali Mountford: The hon. Gentleman should allow me to finish. Conservative Members have missed the point about basic priorities. We must start with those in greatest need. The Secretary of State is absolutely right to look into providing second pensions and increased pensions. That process needs to be inclusive and consultative. The Conservative party bludgeoned people into decisions without properly consulting. At least at the end of our process of consultation, a consensus will emerge on how future pensions are to be provided. It is the pensioners of today who are not on income support who must be the main focus of our attention.
Under the Conservative Government, one quarter of all pensioners did not get an adequate second pension, and 12 million of them got no company pension. Then there was the diabolical tragedy of the mis-selling of pensions. There was also a growing gap between the poorest and richest pensioners. In 1979, the bottom 20 per cent. received £55.90 and the top 20 per cent. £169.60. Sixteen years on, the bottom 20 per cent. have had an increase of £15 but the top 20 per cent. have enjoyed an increase of £103. If that drift were allowed to continue, the poorest would become even poorer and the richest would continue to get richer. That is no way to proceed. The challenge for this Government is to provide for the poorest pensioners, which is why I commend my right hon. Friend's proposals to the House.

Mr. Steve Webb: I brought with me to the Chamber tonight a secret—a secret concerning how the Conservatives are planning to win the next general election— [-10N. MEMBERS: "Tell us."] I note a greater than

usual attentiveness on the Conservative Benches. After close textual analysis of tonight's motion, it is clear to me that the Conservatives plan to sweep back to power on a tide of amnesia. They hope that we will all forget the past 18 years and concentrate only on the past eight months. They must think we have very short memories.
The Tories spent 18 years ripping the heart out of rural Britain, and they now pretend to be the friends of the countryside. They spent 18 years squeezing higher education, but now pretend to be the friends of the students. After spending 18 years slashing future spending on state pensions and creating a shambles over private pensions, they now claim to be the friends of pensioners. It just does not add up.
The motion claims to deal with the failings of the present Government. We shall assess those claims in a moment; meanwhile, it is important to remember that the real problems with pensioner incomes have arisen not just since 1 May but since 1979.

Mr. Ian Taylor: Before we all join the hon. Gentleman in suffering from amnesia, will he recognise that no Government will change the rules linking pensions to prices rather than earnings; and that, if Labour ever did that, the Government would be unable to provide the expenditure for health and education that they want to?
The Conservatives' proposals on pensions just before the election would have increased expenditure on them by £7 billion a year, at the peak, in order to bring our pension system under better long-term control. Why did not the hon. Gentleman welcome those measures—or perhaps he has not yet worked out what Liberal Democrat party policy is on the issue?

Mr. Webb: The hon. Gentleman is quite right to say that the Government will not link the basic state pension to earnings again. I would be most surprised if they did, but I am sure they will not. Nor would the official Opposition; and I would be greatly surprised if our party policy, as it is reviewed, came up with that idea, either. It is true that all the parties seem agreed on that.
The motion suggests that everything that is wrong with pensioners' incomes started to go wrong on 1 May. That is simply not true. Pensioners who retire in the new millennium will have far less to live on, not as a result of this Government's policies but as a result of Conservative policies. The basic state pension will have been eroded, by the breaking of the earnings link, to a level which Michael Portillo once famously described as nugatory. SERPS pensions will be worth less than half what they would have been under the pre-Conservative system.
How many billions did those Conservative measures take off pensioners? The answer is: not the £5 billion that the Government have taken from pension funds, but tens of billions of pounds. Yet now the Conservatives have the gall to criticise the Labour Government for taking £5 billion out of the system. That is small beer by Conservative standards.
It is not as if the private sector fared any better. Was it not a Conservative Chancellor, Mr. Lamont, who first spotted that tax credits were a wheeze for raising £1 billion? It seems that a few years ago that was right when the Conservatives did it; now, when the Labour party does its famous trick of following Conservative


policies, the Opposition criticise it for doing so. How implausible it is when the Conservatives pretend to be outraged when the Labour Government follow their lead.
What about the debacle over personal pensions, which is still only slowly being unravelled? The Labour Government may not have done much for pensioners so far, but they have at least tackled this one scam with a great deal more energy and urgency than it ever received from the Conservatives. Indeed, I pay tribute to the Economic Secretary to the Treasury for all she has done and for the energy that she has devoted to that campaign. We wish her well with it.
What of the Government's record on pensions? For today's pensioners, they have cut VAT on fuel from 8 to 5 per cent—no doubt a move welcomed by pensioners. But Labour Members should not get carried away into thinking that that will make a big difference to elderly people. The Government announced the cutting of VAT on fuel in July. That had the advantage of feeding into the September retail prices index, which meant that pensions next April will go up by less than they would have without the cut in VAT. Taking account of that, a recent written answer stated that a typical married pensioner will get about 25p a week from the cut in VAT on fuel—not unwelcome, but scarcely a king's ransom.
What about the other measure—winter fuel payments? That, too, is a welcome move, although there is no long-term strategy to deal with fuel poverty: it is to apply just this year and next. The payment is worth less than 40p to a typical pensioner. Added together, therefore, the two measures are worth less than £1 a week to the typical pensioner. That hardly constitutes a serious attack on pensioner poverty.
As regards changes to tax credits, it is disingenuous of the Government to pretend that they can take £5 billion from pension funds without affecting pensions—

Mr. Coaker: The hon. Gentleman is falling into the same trap as the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) fell into—equating a change in the tax regime with an effect on pension fund income. Pension funds operate in the total economy and depend on a range of factors, not just the tax regime. We cannot ignore the general health of the economy, investment returns and so on—they all affect pension funds as well.

Mr. Webb: The hon. Gentleman is right, to the extent that tax treatment is but one of a range of factors. I am not relying on my own opinion here, however. The Government Actuary must be preening himself—everyone seems to have been reading his report. Indeed. I can recommend it as a stonking good read. The Government Actuary has said that returns to pension funds, allowing for possible increases in dividends, will be lower because of the Government's tax changes. Presumably the Government Actuary has no political axe to grind; otherwise, he would not recommend changed rebates for personal pensions. Independent comment states that the changes will damage pensioners' incomes. That is why we have opposed them.
I accept that the Government will not reverse that policy now, but I want to raise with the Pensions Minister one group that will suffer through the change, and for which many of the arguments advanced by Labour

Members do not stand up as a defence. I refer to members of closed pension schemes—people whose employers have gone out of business and for whom there is a pot of money in the pension fund. Where there is no sponsoring employer, if the tax credit is cut, the income from the fund goes down and there is no employer to make up the difference.
There is a danger that people such as my constituents in the DRG pension scheme will lose income. They will say, "A Labour Government cut my pension." I am sure that the Pensions Minister would not want them to say that. I ask him to look again at the position of people in closed pension schemes.
One fundamental point underlies the debate about pensioner incomes. The Government have taken a number of small but welcome measures to help pensioners with their fuel bills. They are also rumoured to be examining the cost of television licences and of public transport for pensioners. Those proposals would no doubt be well received by many pensioners.
Most of all, however, pensioners need, and I believe deserve, security and a decent income that they decide how to spend. Ultimately, what matters is not gimmicks or short-term sticking plaster. If pensioners cannot afford their fuel bills, television licence or bus fares, it is because their basic income is too low. Until that issue is addressed, neither of the two larger parties can claim to have taken seriously the concerns of pensioners.

Mr. Phil Hope: I join my hon. Friends in welcoming the debate. Having listened to the opening remarks of the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), may I say how strange it is to welcome to the Chamber yet another representative from the planet Zarg. That is where I assume he is from: given the remarks that he made, he cannot be living on this planet.
Pension reform is one of the greatest challenges facing the Labour Government. Ensuring decent incomes in retirement is a key aim in the Government's wider strategy for tackling social exclusion and reducing poverty. Regrettably, we start with a Conservative inheritance that has failed today's pensioners, and would have devastated tomorrow's pensioners too.
A quarter of today's pensioners do not have an adequate second pension. Almost 2 million depend on income support. The Tories did not lift a finger to ensure that the poorest pensioners received the benefits to which they are entitled. They abandoned a million pensioners, mainly women, to live on incomes well below the poverty line.
We know that 12 million people do not have access to a company pension. For people on low or modest incomes, private personal pensions can be poor value for money. In some cases, £1 in every £4 of savings is eaten up by fees and charges. We know, too, that the Tories wrongly encouraged people to opt out of their company pension into private personal pensions, and then failed to take tough action on the disgraceful pension mis-selling that they encouraged. I wonder when those people will get an apology from the Conservative party.

Kali Mountford: Would my hon. Friend be surprised to hear that a pensioner in my constituency of Colne


Valley, who lost £21,000 because of wrong advice, was compensated by only a few hundred pounds when his case was eventually settled?

Mr. Hope: I am not at all surprised to hear that example. There are thousands of other similar examples—a devastating legacy of the appalling treatment that the Opposition, when in power, meted out to pensioners.

Mr. Oliver Letwin: rose—

Mr. Hope: The Conservatives in government not only targeted their attacks on vulnerable pensioners: they used a shotgun approach. They tried to attack every pensioner by raising VAT on fuel to 17.5 per cent., which the hon. Member for Chingford and Woodford Green supported and voted for, even though his own Conservative constituency association urged him not to do so.

Mrs. Gorman: rose—

Mr. Hope: I give way to the hon. Gentleman.

Mr. Letwin: I tried to intervene before the hon. Gentleman left the subject of the mis-selling of pensions, as I have a genuine interest in the matter. Does he think that it will be one year or two, three, four or five years before the Labour party stops hiding behind that accusation to excuse every failing of the Government?

Mr. Hope: What an intriguing intervention. We are invited to suggest how many years it will be before the Conservatives come up with an apology for the way that they treated pensioners. The Labour Government understand that there is a crying need for reform of the pension system.
Over the past 20 years, the incomes of retired people as a whole have risen faster than those of the working population, but that statistic hides the reality of the Tory legacy-inequality among pensioners has risen dramatically over the same period.
Pensioners are among the poorest people in Britain today. Inequality has widened between rich and poor pensioners, and between older and younger pensioners. Unless things change, that inequality is set to widen. On the basis of reasonable assumptions, it is estimated that, over the next 30 years, the incomes of the poorest one fifth of pensioners will rise by about 20 per cent., but the incomes of the richest one fifth will rise by 80 per cent.
As my hon. Friend the Member for Colne Valley (Kali Mountford) reminded the House, the poorest pensioners tend to be older, and they tend to be single and women. A quarter of pensioners are entitled to income support, yet nearly 40 per cent. of them—1 million pensioners—do not receive the income support they should get. It is vital that we give immediate help to the poorest pensioners. Like my colleagues, I am delighted at the announcement by my right hon. Friend the Secretary of State that £15 million is to be spent on pilot schemes throughout the country to ensure that the poorest pensioners, the people who have suffered the most, will get the benefits to which they are genuinely entitled.
On the wider priorities, there are many ways that pensioners can share fairly in the increasing prosperity of the nation, not just through state pensions but through state income-related benefits, non-state pensions, savings and earnings, concessionary schemes and the tax system. For many pensioners, the national health service—long-term health and community care—can be as important to their quality of life as their income. We must make sure in government that we make the most efficient and equitable use of all those resources to ensure that all pensioners share in the nation's rising prosperity, but we must give priority to the needs of the poorest.
The Labour Government have done much in that regard already. The cut in VAT on fuel benefited all pensioners, as did the winter fuel payment of £20 to every pensioner household. We made sure that the poorest pensioners, those on income support, received more— £50 per household—because they are most in need.

Sir Robert Smith: On the issue of cold weather payments, does the hon. Gentleman not think it perverse that the Government are willing to give a blanket payment to pensioners across the country, regardless of weather conditions, but refuse point blank to do what they called for in opposition and pay pensioners when they experience the cold, by allowing the wind-chill factor to be taken into account in calculating payments?

Mr. Hope: My hon. Friend the Member for Colne Valley has already pointed out that the complicated and difficult assessment procedures for cold weather payments meant that many pensioners switched off their heating because they were not sure whether they would qualify for the payments. Labour has demonstrated its commitment to pensioners by allocating £200 million this year and next year to winter fuel payments—that is more in one decisive action than the Tories managed over 18 shameful years of inactivity.
It is not just about reversing the Tory legacy and tackling inequality: the Labour Government must build a sustainable framework for pensions for the future. A huge amount is spent on pensions throughout the country. More than £74 billion was paid in 1996 to pensioners from all types of pension schemes, of which £33 billion was paid out by the state on the basic state retirement pension and SERPS. From those basic figures, it is clear that a sustainable framework will always comprise a partnership between public and private provision, and be a balance between income sourced from tax and that from invested savings.
Unlike the Conservatives, who would have abolished the basic state pension and struck fear into the hearts of pensioners and working people across the country before the election, the Labour Government must keep their manifesto commitment to retaining the basic state pension as the foundation of pension provision, increasing it at least in line with inflation. We must also retain SERPS as an option for those who wish to remain within that scheme.
We have much more to do. Many people in this country are not able to save for a second pension. The Tory pension mis-selling scandal, which we are making decisive moves to settle, has made many people nervous about relying on invested second pension


schemes. Tory dogma and the Tories' failure to regulate the industry and the market properly caused that personal pension scandal. It need not have happened.
We must develop a new framework of flexible, value-for-money, second stakeholder pensions in order to help to meet the needs of those on low and modest incomes with changing patterns of employment who cannot join a good-value second pension scheme. We must ensure that those schemes are large enough to enjoy economies of scale, are approved to meet high minimum standards, are run in the interests of the members and not the companies, and are run in a way that allows members to understand readily what they are paying and what they might expect to receive when they retire.
We must also remember that a significant number of people cannot be expected to save for their own retirement. Many carers are unable to work, or suffer greatly reduced earnings because of their caring responsibilities. I believe that the Government should credit carers, and perhaps others, into a citizenship pension that will provide a second pension for those years when they are unable to work. That will help to avoid poverty and dependence on means-tested benefits as a consequence.
Most of the poorest pensioners are women. Low pay during their working lives means that women are often less able than men to build a second pension. They may also experience disadvantage in their pension incomes if they are divorced. Many women are also badly served by SERPS at present. Stakeholder pensions, citizenship pensions and pension sharing on divorce are a combination of measures that will cut the routes to pensioner poverty and significantly narrow pension inequality between men and women in future.
The Government must develop a pensions strategy that can cope with a slowly aging society without heaping unsustainable costs on to our children. A sustainable policy for pensions in the next millennium must tackle inequality among pensioners today and create a robust framework to ensure effective and equitable support for the pensioners of tomorrow.

Miss Julie Kirkbride: Thank you, Mr. Deputy Speaker, for calling me to speak in this very important debate.
I have listened to the speeches of Government Members and I believe that a travesty of justice has been done to the previous Government's policies and our pension achievements. [Interruption.] If the hon. Member for Corby (Mr. Hope) would listen, he might understand my points.
The hon. Gentleman admitted that, during 18 years of Conservative government, incomes rose more quickly for pensioners than for the general population. We welcome that fact: it is testimony to our successful pensions record. We recognise—as do the Government, for which we are grateful—that more must be done to ensure that everyone receives a pension. However, we wish to take some credit for what has occurred to create a secure future for many of our pensioner constituents who have fared extremely well.
During the 1980s, the Conservative Government recognised—

Mr. Coaker: Although it may be true that some pensioners have shared in the country's increasing

prosperity, the reality is that the vast majority of pensioners are poor, and that a significant number are absolutely destitute. Is that not a damning indictment of the policies pursued by the previous Government?

Miss Kirkbride: I am afraid that the hon. Gentleman will have to say what his Government will do—to answer the mock indignation coming from hon. Members on the Government Benches—before we on the Opposition Benches will take any lessons about what we should have done while we were in power.
The Government have failed to say that they will do anything significant to raise the basic state pension or add significantly to the benefits that are available to people on income support, or to increase income for the poorest pensioners. I have yet to hear anything from hon. Members on the Government Benches that would suggest that that is being contemplated, and until they do, there is no point in their continuing their mock indignation.

Mr. Letwin: My hon. Friend is making an important point. Does she agree that, importantly, we heard an admission this evening from the Secretary of State that the guaranteed income of £100, which was widely trailed in the newspapers, has disappeared without trace and been replaced by a £15 million pilot project to add to the pile of 150 reviews?

Miss Kirkbride: I could not agree more. It was the death knell for the minimum pension scheme. The Chancellor clearly won in the departmental spending wrangles, which we all know take place behind closed doors.
I want to return to the 1980s and my former Government's record on pensions.

Mr. Gibb: Wouldn't we all?

Miss Kirkbride: Quite. They recognised that the state could not continue to pay pensions in the way it had, as that was unsustainable, and it was necessary to encourage people to save more to sustain them in their old age. The House will be shocked to hear it, but even we on the Conservative Benches want pensioners to have a secure old age, one that they can enjoy in comfort, without fear for their financial future.
Recognising that we had to do more, we introduced private pensions and encouraged people to opt out of SERPS, so that they would no longer be an unsustainable liability on the state in future years. What did the present Government tell the population when they were in opposition? They said, "Don't trust this. You mustn't do this. These wicked private pension schemes will not pay out when you retire." They pretended that what the Conservative Government were trying to do was wicked and unsustainable.
Thank goodness the British population had the good sense not to believe the Labour party at the time, and pursued their private and occupational pension schemes with the SERPS opt-out, and they have been much better off as a result.

Kali Mountford: Would the hon. Lady like to join the hon. Member for Gainsborough (Mr. Leigh) and apologise for the pensions mis-selling fiasco and the real damage it did to confidence in pensions?

Miss Kirkbride: Again, it is a travesty of justice for the Government to pretend that we were responsible


for pensions mis-selling. We regret it enormously, and welcome what the Government are doing to put the matter right.
The situation came to light in the mid-1990s, and we welcome what is being done to restore the contributions that people accrued. There is no question but that we deplore and condemn pensions mis-selling. We expect the pensions companies to put it right. For the Government continually to suggest that we encouraged it and wanted it to happen, and that we welcome it and do not regret it, is quite preposterous.
The Government also ignore the fact that what happened to the private pensions industry—if I may call it that—during the 1980s and 1990s has been a signal success for the British economy and the British people. Both those factors are important, as in future years there will be a crisis. At present, 3.4 people in the working population sustain one pensioner. In 40 years' time, 2.6 people will sustain a pensioner in his or her old age. We had to address those points. What we did on private pensions has been a massive bonus for the British economy and British pensioners. Those who have an occupational and private pension scheme can look forward to a secure old age.
Figures provided by the Library show what a magnificent success the private pensions industry has been. In 1995—one expects that the figure has gone up considerably since then—£750 billion, roughly equivalent to the nation's gross domestic product, was invested in private pensions. In 1991, when the United Kingdom's pension fund assets were around 73 per cent. of GDP, they were 66 per cent. in the United States and 10 per cent. in Japan, Germany and France.
When I am 90 years old, in 2050, when I shall still be taking a keen interest in the performance of the economy and the Government's tax rate, I am pleased to discover that the British economy's balance sheet will be even healthier. It will so exceed any other balance sheet in the western world that Conservative Members can truly take magnificent pride in what has happened.
In 2050, unfunded state pension liabilities in Britain will amount to just 15 per cent. of GDP—that amount of money which taxpayers will have to contribute in order to pay pensioners who have a legitimate expectation that the money they have salted away when they were working will be there when they retire. The sad fact is that many EU countries, instead of that money being invested privately and securely tucked up in some private bank account from which it can be released when needed, will be looking to their taxpayers, or will have to borrow the money to pay those liabilities.
The Japanese will find that their unfunded liabilities amount to 399 per cent. of their GDP; the Germans, 431 per cent.; the French, 370 per cent. — [Interruption]—the Italians, 338 per cent.; the Canadians 189 per cent.; and, as hon. Members making sedentary interventions may have forgotten, the British, only 15 per cent. That is a massive success story, which will transform the future British economy, and Conservative Members perceive it as a considerable obstacle to joining a single currency as and when that decision comes along.
Having put straight the Conservative Government's record—

Mr. Webb: The hon. Lady says how wonderful it is that all those future liabilities will have been reduced, but, as my hon. Friend the Member for Newbury (Mr. Rendel) has said, anyone can do that if they scrap the basic state pension, which is essentially what, in Michael Portillo's words, the Conservatives are planning to do. Is there anything particularly impressive about reducing future state liabilities by abolishing the benefit?

Miss Kirkbride: I think that the hon. Gentleman is a professor, and I cannot believe that he has made such a facile intervention when he knows that I am talking about private pension fund contributions which have transformed the balance sheet. That is reflected in the unfunded liabilities and the percentage share we then have.
During their 18 years in power, the Conservative Government did not abolish the state pension, and there is no question that Conservatives will do so in five years' time, when they are back in government. That is a preposterous suggestion. It is one which Liberal Democrat and Labour Members like to perpetrate, and it is nonsense. We have not done it, and will not do it. I shall not continue having a conversation with the hon. Gentleman when I am meant to be addressing the House.
I return to the Government's pension policy because they are in power, albeit that they often forget that when they ask Conservative Members for our views on the subject. The Government have severely let down many pensioners on the upper end of the pension earnings, who are nevertheless vulnerable in their incomes and feel insecure about how they will meet their liabilities in their old age. They are equally deserving of consideration.

Mr. Coaker: Does the hon. Lady agree that, in terms of insecurity and income in old age, the Government's decision to set up a royal commission to look into the cost of nursing home care for the elderly is of great significance to people in their old age, now and in the future? One of the most damaging feelings of insecurity experienced by people is how they will be able to afford to look after themselves and their relatives. That is a fundamental problem that the royal commission will address.

Miss Kirkbride: I recognise the issue that the hon. Gentleman has raised. It is equally important to my constituents. Although I welcome the quick recommendations of the commission, my constituents and those of the hon. Gentleman can take no comfort from the fact that, after 18 years in opposition, the Labour party could not come into office with proposals ready to do something about the problem, but has postponed any decisions until it hears the recommendations of the royal commission.
I do not wish to repeat what was said by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) about how iniquitous the changes to ACT have been in reducing income available to future pensioners as well as existing pensioners. They may find that, as a result of the changes, they will receive a smaller increase in their pensions every year because their pension fund will no longer be as well off as it would have been had the ACT changes not taken place.
The figures are clear. The amount of tax raised is £5 billion, which is equivalent to about 2.5p on income tax. Had the Government been more honest and put that increase in revenue on to income tax bills, I would have had more respect for them. Instead, they have tried to introduce a sneaky, sleight-of-hand tax which they hope people will not notice.
In the interest of open government, of which Labour Members are so fond, I call upon the pensions industry to clarify what the loss in income has been as a result of the changes made to ACT. I am sure that it would come as a shock to many of my constituents to learn that the money they think they have been saving for their old age has now been reduced considerably as a result of that sleight of hand.
We have still had no clarification from the Government about whether they propose to means-test the state pension. That is now the real issue. As my hon. Friend the Member for Chingford and Woodford Green pointed out, the manifesto commitment in 1997 does not rule out the fact that affluent pensioners might be facing the demise of their old-age pension, to which they are entitled as a result of their national insurance contributions. I would welcome the Government making clear their policies on that.
The Government's proposals for the stakeholder pension raise the biggest question that the Government will have to face as and when they introduce their proposals on the Floor of the House. As we have pointed out, many people do not have a second-tier pension because they are on low incomes. They might find it difficult to save for a pension, because they do not earn a great deal and because the day they reach 65 seems a long way off.
If the Government are to succeed in increasing the number of people who have a second-tier, funded pension, they will have to decide whether to make contributions to that stakeholder pension compulsory.

Mr. Richard Allan: The hon. Lady is making a good case for some sort of minimum wage. That would raise incomes sufficiently for people to be able to pay into a pension scheme.

Miss Kirkbride: We will have to see the level at which the minimum wage is introduced when the Government announce their plans. If it is introduced at £3.60—as has been widely speculated—it will not be enough in terms of weekly earnings to take the average man with two children, who is trying to keep a roof over his family's heads, above the level of family credit. Therefore, the state will still contribute to his earnings.
The preposterous nonsense that the Government are trying to perpetrate—that somehow the minimum wage will take people off state subsidy—is not true, unless the wage is set at such a level that it destroys jobs wholesale. I would be grateful if the Minister would speculate on the introduction of the stakeholder pension, and whether the lower-paid will have to make compulsory contributions to that pension.

Mr. Desmond Browne: The hon. Member for Bromsgrove (Miss Kirkbride) eulogised the private pensions industry. I do not want to

be mean-spirited about the impressive statistics, but she did not give us the comparison of the public state pension as a percentage of GDP. While we may be at the top of any league table in terms of private pensions, we were near the bottom—in fact, we were second from bottom—of the EU league table in 1995 in terms of the state pension as a percentage of GDP.

Mr. Letwin: I am exceptionally grateful to the hon. Gentleman for giving way at such an early stage, but he has made an important point. Is that not exactly the position that his Government's policies will institutionalise for the future?

Mr. Browne: In my view, it is not.
As a result of those figures, we have heard from my right hon. Friend the Secretary of State, others of my hon. Friends and the hon. Member for Northavon (Mr. Webb) examples of the growing problems of pensioner need—especially for the poorest pensioners—which were created by the previous Government's changes to the British state pension system. It is nothing short of breathtaking hypocrisy for the Conservative party, which had a deplorable record on pensions, to criticise this Government, who inherited that record of Tory failure.
It was interesting that, writing in The Times on 5 August, the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said:
Countries across Europe have failed to encourage independence, private provision and reform of the state pension system. The Conservative Government achieved all three of these aims and bequeathed Labour a sound basis on which to build.
One can imagine my surprise, having read that, that a defence of that record was conspicuous by its absence from the hon. Gentleman's speech.
The view of the hon. Member for Chingford and Woodford Green is not shared by the vast majority of pensioners in my constituency, where approximately 20 per cent. of the population are pensioners. Some are the poorest pensioners in the United Kingdom, and all need reassurance that they will have adequate income levels in their retirement. They certainly never received any such assurances from Conservative Members. Instead, the previous Government left a legacy of a Britain where 1.7 million pensioners are so poor that they have to depend on income support and, as we have heard, a further 1 million do not claim the income support to which they are entitled.
I am repeating the statistics, but they bear repetition. In addition, pensioner inequality is growing. The top 10 per cent. have seen their incomes growing steadily due to their share in the private pension industry boom, but the bottom 10 per cent. have become progressively poorer. In my constituency, prospects are no better for the pensioners of the future. Of those who are lucky enough to have work, the majority do not have access to a company pension scheme.
Social justice, the inadequate level of state pension and the predicted demographic changes—whether they turn out to be a demographic time bomb or not—which will see the ratio of people of working age to pensioners falling in the first half of the next century, demand that finding a way to deliver a decent income is a priority for the Government. It shall be found.
The Tories took steps to ensure that the aging of the population posed no great threat to public finances, but they failed to address the fundamental challenges of pension reform until their Government's dying days, and they did so for electoral purposes. Until then, they had turned their back on Britain's pensioners.

Mr. Hope: Not only did the Tories not take into account the needs of the poorest pensioners before the general election; they have continued to fail to do so since then. The motion before us is entitled "Effects of the Government' Policies on Pensioners' Incomes". Is my hon. Friend surprised to see that it does not mention pensioners living on income support or anyone who was mis-sold a pension by the previous Administration?

Mr. Browne: My hon. Friend makes a good point. Any mention of poor pensioners has been conspicuous by its absence from Conservative Members' speeches.
I was discussing electoral pension reform. True to their Thatcherite roots, in March 1997, the Conservatives responded to a call by Professor Patrick Minford and unveiled their plans to privatise the state pension. Had they had their way, the end of the previous Parliament would have seen the scrapping of the basic state pension and SERPS and their replacement by a private pension scheme, which, even in the most optimistic view, would have guaranteed a pension worth only £175 a week in 2040.

Mr. Letwin: At today's prices.

Mr. Browne: Assuming a real earnings growth of 1.5 per cent. a year, the new pension would have represented 23 per cent. of pay compared with 36 per cent., which men on average earnings were receiving in 1997. In calculating that optimistic sum, the Conservatives paid no regard to inflation or the cost of looking after the funds and, most culpably, they ignored completely the financial services industry's failure over the preceding decade.

Mr. Letwin: Will the hon. Gentleman give way?

Mr. Browne: No, I do not have time.
During that time, instead of making rigorous efforts to investigate the mishandling of 1.5 million pensions by the private sector, the Conservatives planned to hand over the management of any replacement of the state pension and SERPS to those same companies. So enamoured were they with the dogma of privatisation that they were prepared to hand over £320 billion of taxpayers' money to an industry whose credibility had reached rock bottom, as it had consistently failed to right the wrongs of the pensions mis-selling scandal. In many ways, it was hardly surprising that they should wish to do that, as they had ignored financial experts' warnings when they passed the Social Security Act in 1986 and happily endorsed the mass marketing of private pensions.
The Act was calculated to entice millions of people to switch from perfectly good pension arrangements for the promise of greater future security in the private sector. Between 1988 and 1994, insurance companies,

independent financial advisers, banks and building societies sold more than 5 million private pensions. For the financial companies, it was a bonanza. For some of their customers it worked, but for a significant minority it did not. For them, pension advice was negligent and sometimes downright dishonest. As a result of the absence of effective regulation, hundreds of thousands of people were cheated by both cowboy companies and well-known firms. Each case was a personal tragedy and, instead of facing security in their retirement, hundreds of thousands faced uncertainty and poverty.
Bad as that was, it was made worse by the length of time those people had to wait for compensation. Had Labour not won the election in May 1997, many of them would still be waiting. The previous Government's history of cleaning up the mess that they created is a disgrace, to say the least. In 1994, the Securities and Investments Board went to the length of requiring firms to review the most urgent cases, but deadlines for those reviews just came and went and the Tory Government did nothing.
From 1994 to 1997, the Tory Government failed to tackle that problem effectively, but within 14 days in government my hon. Friend the Economic Secretary to the Treasury had met 24 firms responsible for three quarters of the cases and she left them in no uncertainty that she was determined to take firm action. The Tories did not get that far in three years.
To be fair to the hon. Member for Chingford and Woodford Green, he has written that the Government were
right to demand that the mis-selling of pensions is fully resolved and reparations made.
However, he did not do that until August 1997, and he now wishes to portray himself as the champion of the pensioner. Where were those demands for remedial action between 1992 and 1997? Unlike the hon. Member for Gainsborough (Mr. Leigh), he does not even now, in 1998, have the courage to make a simple apology for that omission.
Results have been achieved because this Government have refused to let the issue rest on the back burner. My hon. Friend the Economic Secretary to the Treasury has focused public concern and media attention on the firms responsible. The Tories' previous level of inaction did nothing to help pensioners and the victims of the scandal; it served only to highlight their own lack of concern for some of the most vulnerable groups in our society.
The Labour Government have quickly ended the misery of many hundreds of thousands of people who were in fear of their financial security in retirement. The Labour Government will also improve the lot of many millions of pensioners by making a winter fuel payment to them, as well as cutting VAT on gas and electricity. Those steps, along with the others that we have taken to help ensure that all pensioners who are entitled to income support receive it, make the Labour Government's record of achievement one of which I am already very proud.

Mr. Quentin Davies: This has been a good debate; in particular, it has been an important debate. I do not think that I can recall in my time in the House of Commons—it must be true for much further back—a Government going in for such systematic evasion of basic questions and such shameless financial


chicanery. Never before in my time have an Opposition had such an important task to perform in exposing the reality behind what the Government have been doing.
This has been a good debate. It was opened by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), who asked all the pertinent questions and did not receive a single response. He was followed by attempts by my hon. Friends on the Back Benches, in interventions and excellent speeches, to prise out of the Government a few answers. They also failed.
My hon. Friend the Member for Gainsborough (Mr. Leigh) made a speech with feeling, which was also extremely well informed. Having studied pension systems in many parts of the world, he made a particularly original contribution to the debate.
My hon. Friend the Member for Bromsgrove (Miss Kirkbride) gave the House an extremely lucid defence of the previous Government's record and pointed out, not least, that the average earnings of pensioners increased faster than national income over the period of the Conservative Government. That is ultimately what counts. She also addressed the issue of the Government's behaviour since the Budget last July, which was fatal for pensioners, and asked a raft of questions. She did not receive a single answer. I hope that she may receive an answer from the Under-Secretary when he winds up.
There is nothing wrong with the Government's rhetoric. Indeed, there is unlikely to be anything wrong with their rhetoric as they stole most of it from the Conservative party. What is wrong and damaging—in this case damaging to the interests of pensioners—is the reality. The Government should be profoundly ashamed that, after only nine or 10 months in office, there should be such a wide gulf between rhetoric and reality.
Whole sections of our country were systematically deceived by the Labour party at the election. Single parents were entitled to believe the assurances that their special benefit regimes would be protected by a Labour Government. Students were entitled to believe the explicit promises that they received, even from the Prime Minister in April, in the middle of the election campaign—on the record—that a Labour Government would not introduce tuition fees. Savers were entitled to believe the promises that PEPs and TESSAs would be safe, but they have retrospectively found that they are not.

Mr. Hope: Will the hon. Gentleman now apologise on behalf of the Conservative party for the scandalous and appalling mis-selling of pensions, and for the fact that the Conservative party has failed to do anything about the million pensioners who continue to live on income support and below the United Kingdom poverty level?

Mr. Davies: The hon. Gentleman makes my point for me. Everything that has been said in this debate not only by Ministers but by Labour Back Benchers relates to the past. They want to keep the electorate's attention away from the present and the future—away from the fatal impact of the Government's actions, in nine or 10 brief months, on pensions.
Pensioners comprise the largest group in our society who were systematically deceived at the general election. What were they told by the Labour party before the general election? Before voting in a general election, on whose words is one supposed to rely about the future

pensions regime if not on those of a party's proposed Chancellor of the Exchequer? On 19 April 1997—on almost the eve of the election—the Chancellor said:
All Labour's proposals will protect and improve the quality of life of pensioners".
That quotation bears repetition. He said:
All Labour's proposals will protect and improve the quality of life of pensioners".
Pensioners therefore went to the voting booth believing that they would be protected. Only two months later, an unprecedented tax was introduced that, from 1999, will take £5 billion a year from the income of pension funds.
How can one possibly expect the British public to believe that pensioners will not be worse off if someone, each and every year, malversates £5 billion from their pension funds? It is an extraordinary state of affairs for a Government to have so little respect for the public's intelligence. Although the public fell for it during the general election, they will not fall for it if the Labour party does it again.
Every one of the Government's actions on pensions has undermined pensioners' standard of living and prospects for a secure retirement.

Mr. Cooker: Will the hon. Gentleman give way?

Mr. Davies: I cannot give way because of lack of time, but I may give way to the hon. Gentleman in a moment.
Criminologists sometimes do studies and write learned articles on a strange phenomenon that they encounter in their work. It is the phenomenon of someone who has conducted such an appalling crime that he or she cannot quite face the fact that it has been committed. I believe that—in the trade—it is called a criminal who is "in denial". If the Labour party is not blatantly telling lies, it must be in denial.
After last year's Budget, the Financial Secretary to the Treasury said:
The measure is good for pensions and pensioners, not bad for them… People should understand that our reforms will benefit pension funds. — [Official Report, 3 July 1997; Vol. 297, c. 507.]
If taking £5 billion out of pension funds benefits pension funds, what does one have to do to damage pension funds? No one other than Ministers, and perhaps a few of their more sycophantic Back-Bench supporters, could even begin to believe such nonsense.
The Government Actuary does not believe such nonsense, because he has just produced a large report mathematically proving that pension funds will have to receive higher funding levels to compensate for the abolition of the dividend tax credit. Independent financial advisers also do not believe that nonsense. On the contrary, they formed up to the Secretary of State and to the Treasury and threatened that unless something was done to protect the value of personal pensions, they would advise their clients to move back into SERPS.
Pension fund trustees—managers of British companies that have occupational schemes—do not believe that nonsense. The National Association of Pension Funds has carried out a survey of them, according to which almost 90 per cent. of employers claim that the abolition of dividend tax credit
will absorb increased costs, but many of them are planning to share the burden with their employees…One in seven employers also report that they are planning to reduce pension benefits


So much for the Financial Secretary's words:
The measure is good for pensions and pensioners, not bad for them…People should understand that our reforms will benefit pension funds." —[Official Report, 3 July 1997; Vol. 297, c. 507.]
Having been rumbled, the Labour party is seeking to retreat surreptitiously—piecemeal—hoping that no one will notice quite what is going on.
Let me ask the Under-Secretary—who has the difficult task of defending the Government this evening—six questions. I see that he is getting out his pen. The whole country will looking forward to the answers to my questions, and the whole country will know that, if there are no answers, the Government are continuing to avoid the facts. [Interruption.]
First, what is the cost of the additional rebates that the Government have decided to provide? Secondly, what would have been the cost if all the contracted-out pension schemes had been compensated at the rate accorded to appropriate personal pensions? Thirdly, what survey has been undertaken of the cost to local government pension funds over the remaining term of this Parliament— [Interruption.]

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the hon. Gentleman. May I say to the hon. Member for Corby (Mr. Hope) that I think he has used up his ration of sedentary comments?

Mr. Davies: Thirdly—as I was saying—what study has been done of the cost to local government pension funds of the abolition of dividend tax credit over the remaining four years of the current Parliament? Would the Minister care to quantify that? If no such study has been done, the Minister and his Government are in dereliction of their duty.
Fourthly, what is the logic or fairness of not compensating the occupational schemes—the contracted-out salary-related schemes—on the same basis as the appropriate personal pensions? The loss to both sets of funds is exactly the same. Will the Minister give the same answer as the Financial Secretary gave in the earlier debate—that employers can pay, and make up the difference? Is he going to say that the Government are acknowledging the existence of a surreptitious additional tax on employers?
Fifthly, what is the logic of not compensating the contracted-out money purchase schemes? What would be the cost of compensating them according to appendix D rather than appendix E of the Government Actuary's paper? Finally and most important of all, there is the question that the Government have systematically avoided at every Social Security Question Time this year. Will they state clearly whether or not they intend to means-test the basic old-age pension?
Those questions are not at all esoteric or technical, however much the Government try to hide behind complicated mathematics. They are questions of genuine, immediate and often searing importance to older people or those approaching retirement age who do not know whether, in their retirement, they will be able to continue to afford their houses, gardens, cars and way of life.
We have not had a worse example of cynicism in the last nine or 10 months, from a profoundly cynical Government, than what has happened to pensions. If the

Minister thinks that a single one of my strictures is unfair, he has the opportunity to put the record straight and provide us for the first time with some answers.

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): I welcome the hon. Member for Grantham and Stamford (Mr. Davies) to the Front Bench tonight. He gave the speech because, as the hon. Member for West Chelmsford (Mr. Burns) explained, the latter did not know much about the subject.
Let me start with the six completely unanswerable questions. The first has already been dealt with in a parliamentary answer. The second could, I am sure, be answered in response to an appropriately worded parliamentary question. The valuation of local authority pension funds will take place in March this year. The remaining three unanswerable questions I shall answer in the course of my speech. I am grateful to the hon. Member for Grantham and Stamford for posing such challenging questions.
It has become clear beyond doubt in the debate, as the hon. Member for Gainsborough (Mr. Leigh) said, why pensions reform is necessary and right. It is also clear why it is this Government who have the determination and vision to bring about the changes.
The Opposition have been generous to the House with their time tonight. We have heard time and again how the previous Government failed Britain's pensioners. Throughout the debate, my hon. Friend the Member for Colne Valley (Kali Mountford), the hon. Member for Northavon (Mr. Webb) and others have reminded the House of the previous Government's actions, describing how pension rights were reduced throughout their period of office and nothing was done to ensure that pensioners would share fairly in rising national prosperity.
Despite the views of the hon. Member for Bromsgrove (Miss Kirkbride), it has been made clear how personal pensions were launched in an atmosphere of hype, fuelled by the then Government and exploited by poorly managed companies, so that more than 1 million people fell victim to mis-selling. I am afraid that my hon. Friend the Member for Corby (Mr. Hope) failed on several occasions to extract an apology for that mis-selling from that Government's representatives.
I do not intend to argue that no changes were needed to the pensions system in the past 20 years, and I would certainly argue that radical improvements are needed to modernise the system and ensure that it can develop and evolve to meet society's needs in the new world of work in the next century. Change is needed, but the party that called this debate stands condemned by its own record: it made changes, but they made things worse.
The symptoms of failure are clear. There is widening inequality among pensioners. One in four are reliant on income support or are entitled to it and not getting it. The previous Government were totally uninterested in those pensioners' plight. They turned a deaf ear to the problems that pensioners faced with their winter heating bills. Millions of people in work today are unable to build up pension rights sufficient to bring them security in retirement.
Perhaps 1 million people were encouraged by the previous Government not to join their employer's occupational scheme, which would have given them the


best chance of a secure retirement. Provisional figures show that membership by men of occupational pension schemes fell by more than 2 million while the previous Government were in office: that is 2 million more men no longer benefiting from what is usually the best pension scheme around.
Millions of people today cannot join an employer's scheme, and while personal pensions have been, and are, fine for some, many people who are in and out of work, the majority of them women, cannot maintain payments and find that the fees and charges can eat up a quarter or more—sometimes far more—of their savings by the time that they retire.

Mr. Gibb: Will the Minister confirm that, in view of the Secretary of State's announcement this evening of yet another pilot scheme, the mooted pensioners' guaranteed income scheme has been dropped?

Mr. Denham: We are committed to honouring our manifesto promise to try to find ways of getting more automatic help to the poorest pensioners, and the pilot schemes that we have launched today and the other research that we are conducting will give us the information that we need to design the best system to achieve that aim. The previous Government did not take such action in 18 years.
I have set out the legacy that the Government's pensions review will have to address, but return to the Opposition's claim that measures taken in last July's Budget, and measures which have followed in part the Budget changes, will damage pension provision. But all hon. Members know that any pension system depends on creating the wealth that will be needed to pay retirement pensions. Boom and bust economics, short-term fixes that throw people out of work and prevent them from saving, and uncertainty, which stops companies investing, all existed under the previous Government, and undermine the economy, investment, British companies and the ability to create the wealth on which our pension incomes depend.
Last July's Budget, which took place after the Chancellor gave the Bank of England greater power and independence, was intended to create conditions for steady, sustainable economic growth. We set out to put the economy on a solid foundation by scrapping measures that distorted investment decisions, by cutting corporation tax and, above all, by putting the country's finances on a sound footing. A Budget that is good for the economy is good for pensions.
There have been significant changes in the pattern of pension provision in recent years, which we needed to address. [Interruption.] I am happy to repeat that I believe that a Budget that is good for the economy is good for pensions. If Conservative Members do not believe that, I wonder what they believe is a good Budget.

Mr. Duncan Smith: I am listening carefully to the Minister, but does he accept that the Government Actuary's report makes it clear that the Government Actuary believes that income from investment fell by 0.25 per cent. directly as a result of the Budget?

Mr. Denham: I shall deal with the Government Actuary's report and our response to it. There have been

significant changes in the pattern of pension provision in recent years. Some pension schemes have changed from salary-related schemes to money-purchase schemes. Other pension schemes have changed from employer's occupational schemes to group personal pensions. Those important trends were not caused by the Government, but were well established; indeed, the actions of the previous Government encouraged them.
We asked the Government Actuary to examine those trends, and issues arising from the Budget. The Budget was for the long term, pensions are a long-term business, and rebates are normally set for five years: in our judgment, no early action was needed at this stage in the quinquennium on salary-related schemes which are investing for the long term. However, some personal pensions providers might have advised members of personal pensions schemes to opt back into SERPS, which might not have been in their long-term interest. So, we have increased national insurance rebates to personal pensions to maintain the attractiveness of opting out.
We have acted to prevent the extra subsidy intended for small contracted-out money purchase schemes being enjoyed by larger schemes which have no need for it.

Mr. Gibb: Why have the Government decided to reduce rebates only for COMP schemes on the basis of an assumed rate of return of 2.25 per cent. when the Actuary has said that the rate of return for pension schemes is 2 per cent.?

Mr. Denham: The action taken on COMP schemes was foreshadowed by Lord MacKay of Ardbrecknish, Pensions Minister in the previous Administration, who said of the trend of moving from salary-related schemes to COMP schemes:
It appears that there are some schemes seeking to take advantage of these new flexibilities in order to maximise the national insurance rebate. There is obviously a great deal of money involved here, and the Government would be very concerned if this were to happen.
Lord MacKay made it clear that the previous Government would keep the effects of the contracting out changes under review, and the Government Actuary makes it clear in his report that if the trend for large schemes to change into COMP schemes continued, that would take funds from the national insurance fund. This Government have rightly acted to prevent that.

Mr. Duncan Smith: The Minister has just come up with a statement in answer to a straightforward question from my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb). My hon. Friend asked why the Government took a different settlement. The Government have missed the point. They did not allow for the fall-off in investment in COMPS. It has nothing to do with the fact that there may be some changes relating to those companies coming into COMPS and everything to do with the fact that the Government were trying to save money on the national insurance fund. That is the fact—savings to the Exchequer.

Mr. Denham: I made it perfectly clear: for occupational schemes there was no need to take action,


whereas for personal pensions there was that need and we took the appropriate action. We recognise that, over the past 20 years—the past 10 in particular—

Mr. Quentin Davies: Will the Minister give way?

Mr. Denham: No, I have given way generously. If the hon. Gentleman does not like the fact that we took the action to protect the national insurance fund that his predecessors said they would take when in government, that is his difficulty.
We recognise that the rebate structure that has evolved over the past 20 years has created inequalities. It does not necessarily match the needs of the different types of contracted-out pension provision now available. Although we have made the necessary short-term changes, we shall review the whole rebate structure in the light of the pensions review and the introduction of stakeholder pensions to ensure that it underpins the Government's new pensions policy.
The Government keep their promises and we have kept our promises to pensioners-both today's pensioners and those who will retire in future. We promised to maintain the basic state pension as the foundation for retirement and to uprate it at least in line with prices. We have kept that promise and we shall honour the manifesto on which we were elected. We have done more: we shall spend —200 million this year and next giving all pensioners help with their heating bills. We are doing more: we have cut VAT on fuel—

Mr. Burns: Prices or earnings?

Mr. Denham: If the hon. Gentleman, who is the Opposition spokesman on the subject, cannot be bothered to reply to the debate, he can at least do without making interventions from a sedentary position.
We are doing more: we have cut VAT on fuel after the Conservative party tried to raise it to 17.5 per cent. We are cutting other VAT, so that more pensioners' homes can be insulated. We are allowing local authorities to invest capital receipts to improve the homes of pensioners, among others.
We are doing more. For 18 years the Conservative party did nothing for those pensioners—mainly women, usually over 75, often living alone—who do not receive the income support to which they are entitled. Instead, the Conservatives blamed pensioners for their poverty. The Government have set out to find out why those pensioners do not claim and my right hon. Friend the Secretary of State has announced nine pilot schemes to find the best ways of identifying those pensioners and encouraging them to claim. We promised in our manifesto to find ways of giving more automatic help to the poorest pensioners and these early actions will help us to find the best way to do so.
The Government have taken action for today's pensioners already. In our pensions review, we are talking to and meeting today's pensioners and giving them a voice at the heart of government. While we tackle the problems faced by today's pensioners, we want to help the pensioners of the future too.

Miss Ann Widdecombe: I thank the Minister for giving way. As we have only

three minutes left, I did not want him to forget one very important question, which he promised to answer. Has his right hon. Friend the Secretary of State ruled out means-testing the state pension?

Mr. Denham: I have made it perfectly clear that we shall honour the manifesto on which we were elected. We shall increase and we have increased the basic state pension at least in line with prices. I am not surprised that Conservative Members scream and shout, because they did not do what my hon. Friend the Economic Secretary to the Treasury has done and set about tackling the problem of pension mis-selling. They did nothing about that problem for five years.
Undoing the damage done by the Conservatives is not enough. We do not want only some people to enjoy a good second pension; we want as many people as possible to do so. That is why we are looking at ways to support and strengthen the framework for occupational pensions. However, not everyone can join an occupational pension scheme, which is why we are consulting on our plans for low-cost, value-for-money, flexible stakeholder pensions. That is also why we want to make sure that those who cannot save for a second pension, such as carers, many of whom are women, can also enjoy security in retirement. We know the scale of the pensions challenge. We know that we must build consensus on a new pension framework that will last. That is why we are consulting so widely with pensioners, employers, trade unions and pension providers. It is a challenge that we must meet.
Tonight, it is the Conservative party that is condemned. For 18 years, it took away pension rights and gave people nothing in their place. It mis-sold personal pensions and did nothing to clear up the mess. For years, it fought against even pension fairness in divorce. It ignored pensioners living in poverty and blamed them for their lack of money. It put VAT on fuel and wanted to raise it to 17.5 per cent.

Mr. James Arbuthnot: rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 161, Noes 294.

Division No. 197]
[9.59 pm


AYES


Ainsworth, Peter (E Surrey)
Brazier, Julian


Allan, Richard
Breed, Colin


Amess, David
Brooke, Rt Hon Peter


Ancram, Rt Hon Michael
Bruce, Ian (S Dorset)


Arbuthnot, James
Bruce, Malcolm (Gordon)


Atkinson, David (Bour'mth E)
Burnett, John


Atkinson, Peter (Hexham)
Burns, Simon


Baker, Norman
Cable, Dr Vincent


Baldry, Tony
Campbell, Menzies (NE Fife)


Beggs, Roy
Cash, William


Bercow, John
Chapman, Sir Sydney


Beresford, Sir Paul (Chipping Barnet)
Chidgey, David


Boswell, Tim
Chope, Christopher


Bottomley, Peter (Worthing W)
Clappison, James


Brady, Graham
Clark, Rt Hon Alan (Kensington)


Brand, Dr Peter







Clark, Dr Michael (Rayleigh)
McLoughlin, Patrick


Clarke, Rt Hon Kenneth (Rushcliffe)
Madel, Sir David


Clifton-Brown, Geoffrey
Malins, Humfrey


Collins, Tim
Maples, John


Cotter, Brian
Maude, Rt Hon Francis


Cran, James
May, Mrs Theresa


Curry, Rt Hon David
Michie, Mrs Ray (Argyll & Bute)


Davies, Quentin (Grantham)
Moss, Malcolm


Davis, Rt Hon David (Haltemprice)
Nicholls, Patrick


Duncan Smith, Iain
Norman, Archie


Evans, Nigel
Öpik, Lembit


Faber, David
Ottaway, Richard


Fallon, Michael
Page, Richard


Flight, Howard
Paice, James


Forsythe, Clifford
Pickles, Eric


Forth, Rt Hon Eric
Prior, David


Fowler, Rt Hon Sir Norman
Randall, John


Fox, Dr Liam
Redwood, Rt Hon John


Gale, Roger
Rendel, David


Garnier, Edward
Robathan, Andrew


George, Andrew (St Ives)
Robertson, Laurence (Tewk'b'ry)


Gibb, Nick
Roe, Mrs Marion (Broxbourne)


Gill, Christopher
Ross, William (E Lond'y)


Goodlad, Rt Hon Sir Alastair
Rowe, Andrew (Faversham)


Gorman, Mrs Teresa
Ruffley, David


Gorrie, Donald
Russell, Bob (Colchester)


Gray, James
St Aubyn, Nick


Greenway, John
Sanders, Adrian


Grieve, Dominic
Sayeed, Jonathan


Gummer, Rt Hon John
Shepherd, Richard


Hamilton, Rt Hon Sir Archie
Simpson, Keith (Mid-Norfolk)


Hammond, Philip
Smith, Sir Robert (W Ab'd'ns)


Hancock, Mike
Smyth, Rev Martin (Belfast S)


Harris, Dr Evan
Spelman, Mrs Caroline


Harvey, Nick
Spicer, Sir Michael


Hawkins, Nick
Spring, Richard


Heald, Oliver
Steen, Anthony


Heathcoat-Amory, Rt Hon David
Streeter, Gary


Hogg, Rt Hon Douglas
Swayne, Desmond


Horam, John
Syms, Robert


Howard, Rt Hon Michael
Tapsell, Sir Peter


Howarth, Gerald (Aldershot)
Taylor, Ian (Esher & Walton)


Hughes, Simon (Southwark N)
Taylor, Matthew (Truro)


Hunter, Andrew
Taylor, Sir Teddy


Jack, Rt Hon Michael
Townend, John


Jenkin, Bernard
Trend, Michael


Johnson Smith, Rt Hon Sir Geoffrey
Tyler, Paul



Tyrie, Andrew


Jones, Nigel (Cheltenham)
Viggers, Peter


Key, Robert
Wallace, James


Kirkbride, Miss Julie
Walter, Robert


Kirkwood, Archy
Wardle, Charles


Laing, Mrs Eleanor
Waterson, Nigel


Lait, Mrs Jacqui
Webb, Steve


Lansley, Andrew
Wells, Bowen


Leigh, Edward
Whitney, Sir Raymond


Letwin, Oliver
Widdecombe, Rt Hon Miss Ann


Lewis, Dr Julian (New Forest E)
Wilkinson, John


Lidington, David
Willetts, David


Lilley, Rt Hon Peter
Winterton, Mrs Ann (Congleton)


Livsey, Richard
Winterton, Nicholas (Macclesfield)


Lloyd, Rt Hon Sir Peter (Fareham)
Woodward, Shaun


Luff, Peter
Yeo, Tim


Lyell, Rt Hon Sir Nicholas
Young, Rt Hon Sir George


MacGregor, Rt Hon John
Tellers for the Ayes:


MacKay, Andrew
Mr. Stephen Day and


Maclean, Rt Hon David
Mr. John Whittingdale.




NOES


Ainger, Nick
Atherton, Ms Candy


Ainsworth, Robert (Cov'try NE)
Atkins, Charlotte


Alexander, Douglas
Austin, John


Allen, Graham
Banks, Tony


Anderson, Janet (Rossendale)
Barnes, Harry


Ashton, Joe
Battle, John





Bayley, Hugh
Ellman, Mrs Louise


Beard, Nigel
Ennis, Jeff


Beckett, Rt Hon Mrs Margaret
Etherington, Bill


Bell, Stuart (Middlesbrough)
Field, Rt Hon Frank


Bennett, Andrew F
Fisher, Mark


Benton, Joe
Fitzpatrick, Jim


Bermingham, Gerald
Fitzsimons, Lorna


Berry, Roger
Flint, Caroline


Best, Harold
Flynn, Paul


Blackman, Liz
Follett, Barbara


Blears, Ms Hazel
Foster, Michael J (Worcester)


Blizzard, Bob
Foulkes, George


Blunkett, Rt Hon David
Fyfe, Maria


Boateng, Paul
Galbraith, Sam


Borrow, David
Gapes, Mike


Bradley, Keith (Withington)
Gardiner, Barry


Bradshaw, Ben
George, Bruce (Walsall S)


Brinton, Mrs Helen
Gerrard, Neil


Brown, Rt Hon Nick (Newcastle E)
Gibson, Dr Ian


Brown, Russell (Dumfries)
Gilroy, Mrs Linda


Browne, Desmond
Godsiff, Roger


Burden, Richard
Goggins, Paul


Burgon, Colin
Gordon, Mrs Eileen


Butler, Mrs Christine
Griffiths, Jane (Reading E)


Byers, Stephen
Griffiths, Nigel (Edinburgh S)


Campbell, Mrs Anne (C?bridge)
Griffiths, Win (Bridgend)


Campbell, Ronnie (Blyth V)
Grocott, Bruce


Canavan, Dennis
Gunnell, John


Caplin, Ivor
Hall, Mike (Weaver Vale)


Casale, Roger
Hamilton, Fabian (Leeds NE)


Caton, Martin
Hanson, David


Cawsey, Ian
Harman, Rt Hon Ms Harriet


Chapman, Ben (Wirral S)
Healey, John


Chaytor, David
Hepburn, Stephen


Church, Ms Judith
Heppell, John


Clapham, Michael
Hesford, Stephen


Clark, Paul (Gillingham)
Hill, Keith


Clarke, Rt Hon Tom (Coatbridge)
Hinchliffe, David


Clarke, Tony (Northampton S)
Hoey, Kate


Clelland, David
Home Robertson, John


Clwyd, Ann
Hoon, Geoffrey


Coaker, Vernon
Hope, Phil


Coffey, Ms Ann
Hopkins, Kelvin


Cohen, Harry
Howarth, Alan (Newport E)


Coleman, Iain
Hoyle, Lindsay


Connarty, Michael
Hughes, Ms Beverley (Stretford)


Cook, Frank (Stockton N)
Hughes, Kevin (Doncaster N)


Corbett, Robin
Humble, Mrs Joan


Corbyn, Jeremy
Hutton, John


Corston, Ms Jean
Iddon, Dr Brian


Cox, Tom
Ingram, Adam


Cranston, Ross
Jackson, Ms Glenda (Hampstead)


Crausby, David
Jackson, Helen (Hillsborough)


Cryer, Mrs Ann (Keighley)
Jenkins, Brian


Cummings, John
Johnson, Alan (Hull W & Hessle)


Cunningham, Jim (Cov'try S)
Johnson, Miss Melanie (Welwyn Hatfield)


Dalyell, Tam
Jones, Mrs Fiona (Newark)


Darling, Rt Hon Alistair
Jones, Helen (Warrington N)


Davey, Valerie (Bristol W)
Jones, Ms Jenny (Wolverh'ton SW)


Davidson, Ian
Jones, Dr Lynne (Selly Oak)


Davies, Rt Hon Denzil (Llanelli)
Keeble, Ms Sally


Davies, Geraint (Croydon C)
Keen, Ann (Brentford & Isleworth)


Davies, Rt Hon Ron (Caerphilly)
Kelly, Ms Ruth


Davis, Terry (B'ham Hodge H)
Kennedy, Jane (Wavertree)


Dawson, Hilton
Khabra, Piara S


Denham, John
Kilfoyle, Peter


Dewar, Rt Hon Donald
King, Andy (Rugby & Kenilworth)


Dismore, Andrew
King, Ms Oona (Bethnal Green)


Dobbin, Jim
Kingham, Ms Tess


Donohoe, Brian H
Kumar, Dr Ashok


Dowd, Jim
Lawrence, Ms Jackie


Drew, David
Laxton, Bob


Drown, Ms Julia
Leslie, Christopher


Dunwoody, Mrs Gwyneth
Levitt, Tom


Eagle, Angela (Wallasey)



Efford, Clive







Lewis, Ivan (Bury S)
Rapson, Syd


Lewis, Terry (Worsley)
Raynsford, Nick


Liddell, Mrs Helen
Reed, Andrew (Loughborough)


Linton, Martin
Reid, Dr John (Hamilton N)


Livingstone, Ken
Robertson, Rt Hon George (Hamilton S)


Lloyd, Tony (Manchester C)
Rooker, Jeff


Lock, David
Rooney, Terry


Love, Andrew
Rowlands, Ted


McAvoy, Thomas
Ruane, Chris


McCabe, Steve
Russell, Ms Christine (Chester)


McCafferty, Ms Chris
Ryan, Ms Joan


McCartney, Ian (Makerfield)
Savidge, Malcolm


McDonagh, Siobhain
Sawford, Phil


McDonnell, John
Sedgemore, Brian


McFall, John
Shaw, Jonathan


McGuire, Mrs Anne
Sheldon, Rt Hon Robert


McIsaac, Shona
Singh, Marsha


McLeish, Henry
Skinner, Dennis


McNamara, Kevin
Smith, Rt Hon Andrew (Oxford E)


McNulty, Tony
Smith, Angela (Basildon)


MacShane, Denis
Smith, Rt Hon Chris (Islington S)


Mactaggart, Fiona
Smith, Miss Geraldine (Morecambe & Lunesdale)


McWalter, Tony
Smith, Jacqui (Redditch)


Mallaber, Judy
Smith, John (Glamorgan)


Mandelson, Peter
Soley, Clive


Marek, Dr John
Southworth, Ms Helen


Marsden, Paul (Shrewsbury)
Spellar, John


Marshall, Jim (Leicester S)
Squire, Ms Rachel


MarshalkAndrews, Robert
Steinberg, Gerry


Meacher, Rt Hon Michael
Stewart, Ian (Eccles)


Meale, Alan
Stinchcombe, Paul


Michael, Alun
Stoate, Dr Howard


Michie, Bill (Shef7d Heeley)
Stringer, Graham


Milburn, Alan
Stuart, Ms Gisela


Miller, Andrew
Sutcliffe, Gerry


Mitchell, Austin
Taylor, Rt Hon Mrs Ann (Dewsbury)


Moffatt, Laura
Thomas, Gareth (Clwyd W)


Moonie, Dr Lewis
Thomas, Gareth R (Harrow W)


Moran, Ms Margaret
Timms, Stephen


Morgan, Rhodri (Cardiff W)
Todd, Mark


Morris, Ms Estelle (B'ham Yardley)
Touhig, Don


Morris, Rt Hon John (Aberavon)
Truswell, Paul


Mountford, Kali
Turner, Dennis (Wolverh'ton SE)


Mudie, George
Turner, Dr Desmond (Kemptown)


Murphy, Denis (Wansbeck)
Turner, Dr George (NW Norfolk)


Naysmith, Dr Doug
Twigg, Stephen (Enfield)


Norris, Dan
Vis, Dr Rudi


O'Brien, Bill (Normanton)
Walley, Ms Joan


O'Brien, Mike (N Warks)
Wareing, Robert N


O'Hara, Eddie
White, Brian


Olner, Bill
Wicks, Malcolm


O'Neill, Martin
Williams, Rt Hon Alan (Swansea W)


Palmer, Dr Nick
Williams, Alan W (E Carmarthen)


Pearson, Ian
Williams, Mrs Betty (Conwy)


Pendry, Tom
Wilson, Brian


Pickthall, Colin
Winnick, David


Pike, Peter L
Winterton, Ms Rosie (Doncaster C)


Plaskitt, James
Wise, Audrey


Pond, Chris
Wood, Mike


Pope, Greg
Woolas, Phil


Pound, Stephen
Wright, Anthony D (Gt Yarmouth)


Prentice, Ms Bridget (Lewisham E)
Wright, Dr Tony (Cannock)


Prentice, Gordon (Pendle)



Prescott, Rt Hon John



Primarolo, Dawn



Purchase, Ken



Quin, Ms Joyce



Quinn, Lawrie
Tellers for the Noes:


Radice, Giles
Mr. Clive Betts and


Rammell, Bill
Mr. David Jamieson.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House welcomes the Government's commitment to maintain the basic state pension as the foundation of pension provision and to uprate it at least in line with prices; welcomes the tough action which is being taken to ensure that victims of pension mis-selling are compensated; welcomes the action the Government has already taken in giving a Winter Fuel Payment to all pensioners with fuel bills to pay and fulfilling its promise to Britain's pensioners by cutting VAT on fuel to five per cent.; welcomes the Government's progress in developing pensions policy which will benefit today's and tomorrow's pensioners; welcomes the widespread consultation the Government is undertaking and notes that the Government's Pension Review has received over 2.000 submissions from pension providers, employers, trade unions, pension experts and pensioners' organisations; notes the widespread support for the Government's proposals for Stakeholder Pensions; and deplores the previous administration's policies on pensions, their imposition of VAT on fuel and their attempt to increase VAT on fuel to 17.5 per cent.

It being after Ten o'clock, MR. DEPUTY SPEAKER put the Questions which he was directed to put at that hour, pursuant to Standing Order No. 55(1) (Questions on voting of estimates, &c.).

ESTIMATES, 1997–98 (NAVY) VOTE A

Resolved,
That during the year ending on 31st March 1998 an additional number not exceeding 975 all ranks be maintained for Service in the Reserve Naval Forces.

ESTIMATES, 1997–98 (ARMY) VOTE A

Resolved,
That during the year ending on 31st March 1998 an additional number not exceeding 460 all ranks be maintained for Army Service.

ESTIMATES, 1998–99 (NAVY) VOTE A

Resolved,
That during the year ending on 31st March 1999 a number not exceeding 49,965 all ranks be maintained for Naval Service, and a number not exceeding 17,755 for Service in the Reserve Naval and Marine Forces.

ESTIMATES, 1998–99 (ARMY) VOTE A

Resolved,
That during the year ending on 31st March 1999 a number not exceeding 132,060 all ranks be maintained for Army Service, a number not exceeding 97,800 for Service in the Reserve Land Forces, and a number not exceeding 6,000 for Service as Special Members of the Reserve Land Forces under Part V of the Reserve Forces Act 1996.

ESTIMATES, 1998–99 (AIR) VOTE A

Resolved,
That during the year ending on 31st March 1999 a number not exceeding 58,280 all ranks be maintained for Air Force Service, a number not exceeding 26,050 for Service in the Reserve Air Forces, and a number not exceeding 270 for Service as Special Members of the Reserve Air Forces under Part V of the Reserve Forces Act 1996.

ESTIMATES, EXCESSES 1996–97

Resolved,
That a sum not exceeding £195,333,507.98 be granted to Her Majesty out of the Consolidated Fund to make good excesses of certain grants for Defence Services for the year ended on 31st March 1997, as set out in House of Commons Paper No. 554.

SUPPLEMENTARY ESTIMATES, 1997–98

Resolved,
That a further supplementary sum not exceeding £2,442,361,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for Defence and Civil Services for the year ending on 31st March 1998, as set out in House of Commons Paper No. 511.

Ordered,
That a Bill be brought in on the foregoing resolutions; And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Alistair Darling, Mr. Geoffrey Robinson, Mrs. Helen Liddell and Dawn Primarolo do prepare and bring it in.

CONSOLIDATED FUND (No. 2) BILL

Dawn Primarolo accordingly presented a Bill to apply certain funds out of the Consolidated Fund to the service of the years ending on 31st March 1997 and 1998: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed [Bill 139].

BUSINESS OF THE HOUSE

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),
That, at this day's sitting, the Fossil Fuel Levy Bill [Lords] may be proceeded with, though opposed, until any hour.—[Jane Kennedy.]

Question agreed to.

Fossil Fuel Levy Bill [Lords]

Not amended (in the Standing Committee), considered.

New clause 1

REGULATIONS AND ORDERS UNDER SECTION 33M

'(1).—Section 106 of the Electricity Act 1989 (Regulations and orders) is amended as follows.

(2) In subsection (2)(a) after "regulations" there is inserted "other than regulations under section 33 (10)".

(3) In subsection (2)(b) after "than" there is inserted "an order under section 33 (5B)".'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. John Redwood: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Alan Haselhurst): With this, it will be convenient to discuss the following amendments: No. 6, in clause 1, page 1, line 6, at end insert—
'(1A) After subsection (5) there is inserted—
(5A) The aggregate of any amounts paid by way of levy under this section in any period of six months shall not exceed the average amount so paid in the previous two six month periods unless the Secretary of State by order so provides.
(5B) An order under subsection (5A) shall be by statutory instrument and shall be subject to approval by the Commons House of Parliament".'.
No. 3, in page 1, line 18, leave out from 'to' to end of line 21 and insert
'add further classes of electricity generation to the definition of "leviable electricity" contained in subsection (8) above.'
No. 2, in page 1, line 21, at end insert—
'(c) substitute for paragraph (a) of the definition of "leviable electricity" in subsection (8)—'is generated by a fossil fuel generating station other than a coal-fired generating station which the Secretary of State has certified is a coal-fired generating station using "clean-coal" technology'.
No. 4, in page 1, line 21, at end insert—
'(10) The levy imposed on a supplier of electricity generated in pursuance of qualifying arrangements under paragraph (c) of the definition of leviable electricity in subsection (8) above may not be greater than the aggregate payments received in respect of that electricity under this section.'.
No. 5, in page 1, line 21, at end insert—
'(10) Any extension of the levy by regulations made under subsection (9) above which results in the levy becoming chargeable in respect of electricity on which it was not previously chargeable shall not have effect until such regulations are approved by resolution of the Commons House of Parliament.'.
No. 8, in title, line 1, after '33', insert
'and in consequence section 106'.

Mr. Redwood: It is a pleasure to be back at the Dispatch Box after a brief interruption to Department of Trade and Industry business, which seems to dominate the House this week. [Interruption.]

Mr. Deputy Speaker: Perhaps the right hon. Gentleman will wait a moment, and perhaps the interruption will be as brief as possible. Will right hon. and hon. Members please withdraw quickly and quietly?

Mr. Redwood: I am grateful to you, Mr. Deputy Speaker, for getting the House to settle down. I pay tribute


to my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), who has been particularly assiduous in studying this short but complex Bill and in helping with preparing the necessary amendments. I hope that he will catch your eye a little later, as I am sure that the House would benefit from his expertise in these matters.
I wonder whether Labour Members have access to a briefing document, rather like the one with which they were equipped for DTI questions. If only that had been issued to all Members of the House before DTI questions, we would not have needed the questions, because everything that Labour Members said during those questions had been written for them from Walworth road. I assume that they will operate tonight on a similar basis.
Whether Labour Members are briefed or not, it is our job to bring to the notice of the House this complex, muddled and difficult little Bill and to illuminate its fundamental aspects with a series of new clauses and amendments designed to probe, test and pin the Government down as they go about their nefarious ways.
The main purpose of our amendments will be to impose some control for the House of Commons—Labour Back Benchers as well as Opposition Members—over the tax-raising powers that the Bill represents; to put in a plea for the coal industry and for the renewable energy industry, which we do not think is properly protected by the provisions of the Bill; to give Labour Members an opportunity to voice their views on the necessary balance of energy policy between gas, coal and oil; and to use the Bill to help to fashion a policy that might produce a better energy mix than the one towards which Ministers are muddling by their actions, inactions and lack of concern for many of the important energy industries in this country.
This is a complex measure because of the way in which it is drafted, and the way in which the original legislation was drafted. I shall try to simplify it for the House. Once upon a time there was a fossil fuel levy. That was an extra charge on electricity generated from coal, oil and gas. The money from the levy was given to power generation from cleaner and greener means. It was given to renewables and to nuclear. It was a boost to a green strategy. On that basis, it was introduced and approved by the House—a limited but helpful measure for the greener and cleaner energies that Ministers then had in mind.
Then there was a Labour Government. After all the muddles which we have seen, it seems a long time ago that they were elected. They were elected both to generate more power from cleaner methods and to save the coal industry. So far, they have found that impossible to achieve, and we see them slipping and sliding into ever bigger difficulties with the Bill, as our amendments will expose tonight.

Mr. Ian Bruce: Is my right hon. Friend a little surprised to know that in Committee we had the greatest difficulty in getting any information from the Minister about what the Labour Government would do to the coal industry? The Electricity Act 1989, with the non-fossil fuel obligation, allows the Government to

help the coal industry in any way they want, using the levy mechanism that was originally put in place to help the nuclear industry.

Mr. Redwood: My hon. Friend has put his finger on a crucial point. I hope that it will be a matter for serious debate by hon. Members on both sides of the House. I know that there are good Labour Members who represent mining constituencies and who are deeply worried by the Government's approach to the coal industry. We have tabled an amendment that offers one partial solution to the problems of coal by offering opportunities to stimulate clean coal technology. We trust that debate on that subject will illuminate some important issues.
The Labour Government have not been able to make up their mind, so they have decided in the Bill to equalise the misery of the levy by proposing it for all, or most, electricity generation. The Bill is unclear because it gives an enabling power to impose the fossil fuel levy on—of all things—renewables. That is quite extraordinary. If the original measure had a single prime purpose, it was to impose a levy on fossil fuels to stimulate renewable energy. For that reason, it was very welcome to many elements of the green movement. Ministers are now taking the enabling power, which will mean that they could impose the levy on the very renewables that it was originally designed to help, as well as preserving the levy in part on the fossil fuels from which it originated.
The Labour Government clearly do not wish to call this new tax—which is what it would become—a fuel tax. However, that is what it is in effect. Under the legislation, the Government have decided to continue to call it the "fossil fuel levy", even though they intend it to apply to non-fossil fuels and perhaps to all fuels used in various types of power generation in this country.
At the same time as we have witnessed confusion, rows and disagreements in the DTI about whether to be more pro-coal, pro-gas, pro-renewable or pro-coal again, we have seen a rapacious Chancellor of the Exchequer, in his public capacity, acting entirely legally but undesirably in taking more money from business. We are worried that the open-ended powers of the Bill will give the Chancellor and his Government colleagues the opportunity to extend on that wider base an ever bigger fuel tax by the back door of the so-called fossil fuel levy.
Part of the purpose of our proposed new clause and amendments is to try to pin down the Government on the seriousness of their taxing ambitions and on whether some limits might be imposed—at least, the necessity to return to the House of Commons for affirmative resolution following debate before additional taxation can be imposed on the energy sector.
The Chancellor has found it relatively easy, in his own terms, to tax pensions, personal savings and businesses massively. He obviously views this as a rather modest measure to tax fuels more generally, and perhaps then will propose diverting some of the moneys from their original purposes to others that he already has in mind.
Our amendments Nos. 6, 4 and 5 are designed primarily to place some limit and parliamentary control on the tax-raising measures. I shall go into some detail on our new clause. New clause 1 is consequential on the drafting of amendment No. 4—it does not make sense unless one refers to that amendment, which inserts new subsection


(10) in the Bill. It tidies up the order-making powers in the original Electricity Act 1989, consequent on the suggested changes in amendment No. 4. I shall not detain the House further with technical explanations of new clause 1 unless Labour Members request that by way of intervention. I think that this will become clearer when they see the way in which amendment No. 4 is intended to operate.
New clause 6 is of considerable substance. It is one of our suggested mechanisms to impose a ceiling on the levy or tax-raising powers—

Mr. Deputy Speaker: Order. I am sorry to interrupt the right hon. Gentleman, but for clarification's sake and for the benefit of the House, I think that he is referring to an amendment rather than a new clause.

Mr. Redwood: You are quite right, Mr. Deputy Speaker. I had misread the significance of the firm line under new clause 1; I mean amendment No. 6.
Amendment No. 6 is an attempt to impose a ceiling on the levy, and we propose to do that by ensuring that the aggregate of amounts paid by way of levy under section 33 of the 1989 Act in any period of six months does not exceed the average so paid in the previous two six-month periods. That should be relatively easy for the Government to accept, if we are to trust them when they say that they have no wish to increase the tax burden on the industry.
If the Government are not willing to accept this or a similar formula, our worries will indeed be confirmed that the intention of the Chancellor and his colleagues is to find an easy means of taxation by the back door, without the normal scrutiny of a Finance Bill, at the expense of the fuel industry and, ultimately, the fuel consumer, the person whom the Government often say that they are keen to help, but to whom their measures on company taxation do the opposite.

Mr. Ian Bruce: I do not know whether my right hon. Friend had a chance to read the Standing Committee debates. Did he notice that the Government's intention to have 10 per cent. renewable energy would put up the price of electricity by at least 15 per cent., which is roughly the percentage on which they won the election by telling pensioners that they would not allow the Conservative Government to increase VAT on electricity bills to 17.5 per cent.?

Mr. Redwood: Indeed. I am grateful to my hon. Friend. He is ahead of me in the argument that I shall set out to the House. He is right to warn that the current energy policy could undo some of the good that had been established by competitive Conservative energy policies in lowering the price of energy delivered to customers. No small Budget measures by way of subsidy or compensation could offset measures of this magnitude if the Government did their worst through the blunders that they seem inclined to make on energy policy.
I notice that the Minister is not rising on any of this, so I assume that we are hitting home when we say that there are considerable dangers to customers as well as businesses in the policy that is unfolding in the Bill and elsewhere, and in the Executive actions and inactions of the ministerial team.

Amendment No. 3 offers the Minister greater flexibility in the proposed legislation. It shows how thoughtful we on the Opposition Benches are about the Minister's conduct. At times, we try to make his life easier, rather than more difficult, as well as to elucidate the mountainous problems that sit on his desk. This is a genuine attempt to assist him. The powers drafted by him or his advisers in the current text are rather clumsy. The amendment would allow the Minister to disaggregate. [Interruption.] The hon. Member for Bolsover (Mr. Skinner) says that I often understate my case. He is quite right.

Mr. Dennis Skinner: I was being ironic.

Mr. Redwood: I did not for one moment think that the hon. Gentleman was being anything other than ironic. I know that irony is the lowest form of wit and that he loves indulging in irony from his sedentary position below the Gangway, but as it was such a weak piece of irony, I thought that Hansard should have the advantage of it.
I am sure that the hon. Gentleman will be grateful for the way in which I read it into the record for him. If only he would refer to his Order Paper and his amendment paper, he might learn something about a subject that should be dear to his heart. I am shortly coming to the coal industry, where I shall look to him for some support. [Interruption.] The hon. Gentleman is saying rather a lot from a sedentary position. I am grateful for that correction. I hope that he will give the House the advantage of his expertise shortly, because coal is of considerable importance to the people he represents, as well as to the constituents of other hon. Members.
Amendment No. 3 allows the Minister greater flexibility. It allows him to disaggregate the definitions of leviable electricity. It would, for example, allow him to make distinctions between different types of renewables, because we would urge him not to extend the tax to renewables. If he finds it irresistible to extend the tax to some renewables, amendment No. 3 will give him an opportunity to select from within the range and be kinder to those that are more speculative, that represent a bigger technical leap or that, by reasons of scale, are more difficult to see through to a successful conclusion.
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I hope that the Minister will speak about the way in which the Government will look after the renewable energy industry and how he intends to promote it in the light of the change against it in the projected levy under the Bill; if he is going ahead with the powers and intends to take disadvantage of them from the point of view of the renewable energy industry, I hope that he will tell us what other measures he is planning to take to offset that and foster that important series of industrial activities.
I come now to perhaps the most important and contentious of the amendments, amendment No. 2, concerning coal. We are offering the House the opportunity to exclude clean coal technology power generation from the definition of leviable electricity.
The Minister has from time to time said, as did his colleagues in the run-up to the election, that one of the ways in which it was hoped to square the circle of wanting greener policies, but also wanting a reasonably sized coal industry, was by promoting and helping clean coal


technology. We have so far seen very little of substance from this ministerial team to put any weight behind their promise to the hard-pressed and deteriorating British coal industry. This gives the Minister an opportunity to do something more.

The Minister for Science, Energy and Industry (Mr. John Battle): Is the right hon. Gentleman suggesting that he wants an exemption for clean coal power stations? Will he confirm that, unfortunately, at the moment there is none because the previous Conservative Government shut down the possibility when they let the technology go from Grimethorpe?

Mr. Redwood: The Government have done nothing of substance so far to promote that technology. I am offering the
Minister a way—

Mr. Clive Betts: Answer the question.

Mr. Redwood: I am about to answer the Minister. If the Whip will contain himself and return to his usual quiet charm, he may learn something.
I am offering the Minister a way of giving some incentive and promotion to the clean coal technology which he has said in the past is needed to provide a bigger coal industry than we are heading for under current ministerial policies.
I do not know whether the Minister is fully aware of the disaster currently hitting the coal industry as a result of the muddle and confusion created by the Government. Has he seen what has happened to coal output in recent months under the Government—a big reduction in coal output as a result of their policies? Has he seen what has been happening—

Mr. Michael Clapham: I marvel at the hypocritical and disingenuous way in which the amendment is being moved. A clear illustration of that is the fact that the right hon. Gentleman was part of the Cabinet in 1993 which threw out the recommendation of the Select Committee on Trade and Industry that £380 million a year for five years be taken from the fossil fuel levy to finance clean coal technology.

Mr. Redwood: There is no hypocrisy on my part. If the hon. Gentleman had done his homework, he would know that I was a keen advocate of the saving of the Tower colliery in Wales, for which I had some modest responsibility as Secretary of State for Wales. That was bought out by the miners and became a successful enterprise. I am pleased that they did that, and it is a great tribute to their achievements. I was keen that that remaining part of the deep-mine industry in Wales should survive. Partly because of my intervention, but more because of the efforts of the miners, it did survive, and I pay tribute to their work.

Mr. Philip Hammond: Does my right hon. Friend agree that there is a considerable difference between a direct subsidy to

a technology and giving it relief from a tax to encourage private sector investment by giving it a relative advantage against other technologies?

Mr. Redwood: My hon. Friend is absolutely right. This is a modest tax incentive, but it is a step in the right direction. The Government have an opportunity to accept the amendment and to tell us what more they will do. The only conceivable fig leaf on their lack of policy is that they make something of clean coal technology and look forward to a future where coal can be sold in reasonable quantities without damaging the stringent environmental targets which they have set or are thinking of setting.
I shall return to my argument about the current grave position of the coal industry.

Mr. Ian Bruce: Will my right hon. Friend give way?

Mr. Redwood:: I shall develop my argument a little and then I shall be grateful for my hon. Friend's wise advice.
The Minister was taken off the case and the Paymaster General was brought in by the Prime Minister to rescue the coal industry. The Prime Minister seemed to announce a deal that had saved the coal industry, at least in the short term. We then learned that nothing had been arranged and the Paymaster General was brought in to arrange something. We now believe that all that was arranged was a decision by leading generators to bring forward third-quarter purchases of coal into the second quarter of the current year. Let us assume that that happens. We have had a mild winter so far, and coal burn must have been reduced as a result. That means that, by the time we enter the third quarter, the burn will be down, the stock position will be up—all things being equal—and the crisis in the coal industry will be that much bigger.
The Minister should recognise that the issue is not just how much coal generators buy in any limited number of weeks, but how much coal they buy and burn and how much coal they wish to buy and burn on a continuing basis over the years ahead. I believe that the Paymaster General's intervention will turn out to have been unwelcome for the Government. It will have built up modest expectations that will be disappointed and it will have exacerbated the problem of adjustment when we get to the end of the second quarter. Also, it leaves the basic conundrum completely unsolved: do the Government wish to make people burn more coal, is it possible to burn more coal and keep to the environmental targets which they have set or are inclined to set and are they in a position to deliver on their promises to the greens and the coal industry?

Mr. Bruce: I wonder whether my right hon. Friend is missing one of the points made ably by the hon. Member for Barnsley, West and Penistone (Mr. Clapham), which is that clean coal technology was at an advanced stage and nobody wanted to buy it. The previous Government decided not to put money into that. The opportunity for it to be used is available to the Government now and we


have not been able to get any commitment from the Minister during the Bill's passage that he will put his money where his mouth is.

Mr. Redwood: My hon. Friend is right. Ministers have been reluctant to produce a package of measures which would promote one of their chosen solutions to the problem of their making—clean coal technology.

Mr. Geoffrey Clifton-Brown: I do not know whether my right hon. Friend is aware of the fact that I had the former Coal Research Establishment in my constituency, just outside Cheltenham.

Mr. Battle: Who shut it down?

Mr. Clifton-Brown: Does my right hon. Friend agree that, if coal is to have any sustainable long-term future, we have to use the latest technology—fluid-bed technology and combined cycle technology with heat recovery? That is the only long-term sustainable way to burn coal.

Mr. Redwood: My hon. Friend is right. If they wish to make—[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. We cannot have the Minister making a contribution right now.

Mr. Redwood: I am grateful, Mr. Deputy Speaker. I shall be happy to answer any point that the Minister might like to make by way of a proper intervention.
My hon. Friend hon. Friend the Member for Cotswold (Mr. Clifton-Brown) is right. There has been an absence of positive action to back up some of the fine words—interspersed with some less fine words—from the ministerial team. The Minister owes the House an explanation tonight of the Government's stance on clean coal technology. They came to power saying, among other things, that they would be better for the coal industry than the Conservative Government had been, and that they would be better for clean coal technology than they claimed the Conservative Government had been. There is always room for improvement in this world, but nobody can say that, since May 1997, there has been any improvement at all. Indeed, there has been movement in the other direction. The mining communities feel let down by the Administration—they expected better and they are getting worse.

Mr. Hammond: Does my right hon. Friend agree that, although the focus over the past six or eight months has been on the pricing of coal contracts to generators, the long-term issue is not about price but about the Government's dilemma—the choice between their environmental targets and their commitment to the coal industry?

Mr. Redwood: Indeed, and we are finding it difficult to clarify how stringent the Government's environmental targets are. The Prime Minister—in a sweeping gesture—set a target for carbon dioxide emissions to be cut by a fifth; a massive movement, bigger than our partners were promising at the time of the conference where the

Prime Minister made that promise. That would mean a further big reduction in the coal industry. Is the Minister prepared to quantify how much?

Mr. Battle: The right hon. Gentleman must be suffering from amnesia. Perhaps the late nights he keeps mean that he cannot cope. Does he remember being a member of a Government who passed the sulphur emission targets which would have shut down every coal power station in Britain. except Drax and Ratcliffe? Who left us that legacy? Can he remind us?

Mr. Redwood: We read in the newspapers that the sulphur targets we set are thought to be too lenient by the Government, who are discussing a considerable intensification of those targets. Will the Minister confirm or deny that? It is rash for him to criticise the sulphur targets that we established in government if his Government are about to create stiffer targets which the coal industry will find it difficult, if not impossible, to meet.
The Minister seems quite unaware of the difficulties that the tensions are causing. As my hon. Friend the Member for Runnymede and Weybridge said, there is a dilemma. The Prime Minister once said that he thought that government was about making hard choices. There is a good, hard choice for the Prime Minister, the President of the Board of Trade or the Paymaster General—or even, conceivably, the Minister, if he is allowed back on the brief. The hard choice is: are the Government greener than the Conservatives, in which case less coal will be mined, or are they less green than the Conservatives, in which case more coal could be mined?
How will the Government resolve the issue? Are they primarily a green Government—in which case they should be honest with the miners and tell them that much of the game is up for the mining industry—or are they a Government who are true to their roots in the mining communities, who will set less difficult targets and who will actively promote the market for coal? I trust that the Minister has read the suggestions from the Coalfield Communities Campaign. It would be good to hear whether he thinks that his Administration would like to accept those suggestions. How would that relate to the Bill? Does the Minister agree that amendment No. 2 is a small step in the direction of helping the coal industry? He has the choice, and he should give the House the benefit of his feelings before the night is much older.
Amendment No. 4 concerns renewables, and states:
The levy imposed on a supplier of electricity generated in pursuance of qualifying arrangements under paragraph (c) of the definition of leviable electricity in subsection (8) above may not be greater than the aggregate payments received in respect of that electricity under this section.
The intention is to make sure that the renewable industry is not cheated under the proposal by having to pay more in levy than it receives from the fund created by the levy payments.
The original intention of the levy was to be generous to the renewables industry at the expense of less clean methods of generating power. The Minister must be more precise than the Bill, given that he wishes to upset the thrust behind the legislation that he inherits. He owes it to the House to say whether he would be happy with the amendment, which is offered in a helpful spirit, or


whether he seriously intends to take money away from the renewable energy sector by imposing a higher levy on it than the payments that it receives. Will the Minister answer that point immediately to save the House some time?

Mr. Battle: indicated dissent.

Mr. Redwood: I am happy to wait until the whole debate is answered, if that is the Minister's wish. He would have saved the House time by saying that he accepted the intention of the amendment, or a lesser or greater intention. We would be happy with an amendment that would allow the renewables industry to receive back more than it pays, for example. We would not be happy with a looser amendment, which would leave the renewables industry potentially subject to the depredations of the Chancellor of the Exchequer and the whims of the President of the Board of Trade, which is the position in the Bill as it stands.
Amendment No. 5 would deal with the democratic difficulties in this proposal. It is a strong principle of our fine and ever-modern unwritten constitution that the House keeps control over the vote of moneys-over the levying of taxation and financial levies on industries or persons. What my right hon. and hon. Friends most regret about the measure is that it gives wide-ranging powers to levy money from businesses without going through separate and normal democratic processes to ensure that the levy rates are properly debated and approved through financial legislation. It would be more honest for the Chancellor of the Exchequer to introduce this kind of proposal as part of a Finance Bill, because its power to levy the whole energy industry is so wide that it has the nature of a tax rather than a special levy for a special purpose, which is how it was originally designed and named by the previous Administration.
The amendment therefore suggests that there should be a separate resolution by the House of Commons in this or a future Parliament to extend the levy. That modest request would be in keeping with the long-established principles on which our democracy is based, and with the principles established by long debate, row and battle centuries ago, when hon. Members rightly thought that it was necessary to have control over the Executive and their ability to raise taxes from industries and people in our community. If the Minister is not prepared to accept this modest proposal concerning the affirmative resolution, I hope that he will give us the benefit of his ideas on how the House of Commons can remain involved in the levying of taxation on the energy industries, given the wide-ranging and open-ended powers that have been drafted in the current version of this obscure but quite important Bill.

Mr. Clifton-Brown: My right hon. Friend is dealing with one of the most fundamental issues that the House has to deal with at this point. Does he agree that the use of Henry VIII clauses, thereby giving Ministers unduly wide powers, is a serious deficit in the democratic process, and that even Ministers, who would naturally want to gain those powers, should resist those?

Mr. Redwood: My hon. Friend is right. DTI Ministers were detained for some hours last night because they were

seeking Henry VIII powers over a minimum wage, with huge and unspecified cost consequences to the public as well as the private sector, and they were not prepared to put in the Bill the issue that concerns Labour Members as well as us—how much the wage would be.
Tonight, we have before us similar legislation, in which the Government wish to impose a levy on new industries and on sectors of an industry that have not previously paid it, without being prepared to specify in the Bill how much that levy would be and exactly how it would be spent on the other side of the ledger.
The Minister is looking around trying to think of something to say in response.

Mr. Battle: Sometimes strange things happen in this place: we change sides. Unfortunately, exactly his present argument was put to the right hon. Gentleman when he was in government in February 1989. He did not think that it was a great matter of principle then, because he voted against our attempt to introduce the affirmative resolution procedure under the 1989 Act.

Mr. Redwood: The Minister walked right into that; he now says that he thinks that it is a good idea to require an affirmative resolution. We seem to have reached happy agreement.

Mr. Battle: But I agree with you now.

Mr. Redwood: I think, Mr. Deputy Speaker, that the Minister means that he agrees with me—with the right hon. Member for Wokingham. But he does not agree with me, because my view is clearly that we need the affirmative resolution procedure, whereas he is saying that he does not want it. [Interruption.] I do not remember having expressed a view at the time.

Mr. Battle: No, but you voted.

Mr. Ian Bruce: My right hon. Friend is having an interesting exchange with the Minister, but if he reads the debates from 1989, he will realise that he is now supporting the view that the present Prime Minister held at that time. It is surprising that the Minister, who I suspect is quite ambitious, does not accept the logic of the argument that the present Prime Minister, then simply the hon. Member for Sedgefield, expressed on the issue at the time. I hope that now he will immediately agree to accept the amendments.

Mr. Redwood: We live in hope, but I fear that my hon. Friend's hope may have outrun the reality of the Administration whom we are, unfortunately, experiencing day by day.
The new clause and amendments are designed to deal specifically with three important issues. The first is whether the Minister will accept the amendments or give us another way in which the House can retain ultimate control over how high the levy could go. We offer him the route of putting a cap, or ceiling, on the levy, and also the route of giving the House its entitlement—a requirement for an affirmative resolution should any change in the levy, especially an increase, be recommended by the Administration.
The second big issue that we seek to highlight is the future of the coal industry. We see an industry that, measured by its output, is in sharp decline. We see an industry subject to quick fixes by the Paymaster General and other Ministers. It may be worthy of a soundbite or a trip down a coal mine by the Minister without Portfolio, but is not considered worthy of a serious energy policy that might provide some relief, although the industry will hit grave difficulties in the summer unless the Minister overcomes his slumbers and gets his job back from the Paymaster General.
We have offered a positive, though modest, suggestion—one of many that could be developed by Executive as well as legislative action, and one that is suitable in the context of the debate—to offer a small fiscal incentive for those developing clean coal technology, which could help the next generation of coal-fired generating plant.
The third important issue which we have highlighted is the treatment of renewable energy, which many Opposition Members believe could play an important role. It represents a very modest proportion of our current power generation, but there are many imaginative and innovative businesses in this country, and it is the kind of technology that may produce a pay-off in exports all over the world as well as at home.
That is common ground between the Minister and us. However, the Minister has an advantage that the Opposition do not have: he can take action this day, or tomorrow in his office, to do something about the idea, whereas we can merely urge action on him. We are offering him the opportunity to respond positively to the proposal and, within the confines of the debate, to tell us what else he can do to support the renewable energy industry.
I think that in one of his more fair-minded moments, the Minister would agree that our fossil fuel levy and its allocation did something to promote energy in this country and that, from a slow start and modest beginnings, we succeeded in promoting some interesting technologies and helping some companies. We would like to know how the Minister wishes to continue that work, and trust that he will respond positively to our new clause and amendments.
Will the Minister accept our new clause and amendments—which are good in intention, modest in scope and helpful—or will he make other proposals that will achieve similar jobs for the United Kingdom and for our energy industry? Will he now take seriously the need for democratic accountability, the need for policy that says something to the mining industry that it wishes to hear and the need to do more to promote the renewable energy industry?

Mr. Skinner: I have spent quite a while as an hon. Member, but listening to that ex-Minister, the right hon. Member for Wokingham (Mr. Redwood), talking about saving the 17 or 20 pits that are left has been like being in fantasy land. I could laugh, but I really want to cry. When the Tories got into power in 1979, there were 300 pits in Britain and about 13 pits in Derbyshire, where I come from. Now the ex-Minister has come to the House to tell us the fairy story that, after only 10 months in opposition, he has totally converted and wants to save those jobs.
Many of the areas that we are talking about have been subjected, with the help of the Tory Government, to opencast mining. Whether we like it or not—it is a sad thing to have to say—the fact is that, once we opencast that land, no one will ever again drive another shaft down it. The geology becomes unstable, preventing anyone from getting at any of the remaining coal. Opencast mining does not get all the coal; it gets only some of it.
I have listened to the ex-Minister for the past 40 minutes, and it has been enough to make a cat laugh. He was there in the Government—a Minister—for the greater part of the time that the pits were closed. If he was not a Minister, he was in the policy unit, telling the other Tory Ministers what to do.
Even after 1984, 174 pits were still left. Then we had the savage experience of Tory Ministers—all of them—going back on what they had told the Trade and Industry Select Committee, which produced its report. My hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) was a member of that Committee, so he knows what he is talking about when he describes the £285 million that should have been used to develop clean coal.
When Ministers set up that Committee, they said that they would abide by its recommendations. But what happened? We had a vote in the House. On the night in question, almost every Tory Member, and every Tory Minister, went into the Lobby to shut those 31 pits, leaving about 20 pits. The Tories privatised the remaining pits, after which we lost another batch of pits, which has left us in this almighty mess.
Whatever phraseology that man—that shadow Minister—uses, the truth is that he could talk a donkey's hind leg off and until his belly warms. But out there in the country, he will not convince the people of anything other than the fact that the Tory Government were hellbent on revenge against the miners after their victories of 1972 and 1974, and that they would go to any lengths to make those miners and their families eat grass.
One of the reasons why we were able to collect money in places such as Bournemouth, Bath, Worthing and all those Tory constituencies—including Wimbledon and Harrow, where I often went—is that people there said, "We want to feed the families that Mrs. Thatcher is starving." When I say "Mrs. Thatcher", I include that shadow Minister. He was involved in it.
So I tell the ex-Minister not to come here with his fancy fairy stories about wanting to help miners. I have never heard such piffle in all my life. I think about the villages that I represent in Derbyshire, and realise that the social fabric has broken down because the Tory Government finally got rid of all their pits.
Let us be clear about it: there is a qualitative difference between how pits were closed when I was working in them and how the Tories closed them. When Parkhouse colliery closed, I had a chance to go to about 15 other collieries within a five or six-mile radius. When they closed down the last 15 pits, make no mistake! There was no chance of being transferred. Ninety per cent. of miners in my constituency were told, "Sorry, there are no more pits left for you to go to." That was the criminal action.
I had a choice; I went to another colliery, but all the young lads were chucked on the scrap heap. There used to be stable communities, where doors were left open at night. When I was first a Member of Parliament, I saw


row after row of miners' cottages with their doors open. Now the social fabric has been destroyed to such an extent that people are kicking one another's doors in, and there are three padlocks on the doors.
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Let no one tell me that everything has happened in the last 10 months. I can be critical of this Government—I have already started—but I cannot blame them for what has happened in the coal industry. I may have to at some point, but I cannot now. There is not a single pit left in my constituency. There is not one in the whole of north Derbyshire; there is not one in Lancashire; there is only that co-operative left in south Wales—and this man here, the right hon. Member for Wokingham, is claiming credit for saving it. Come on!
I believe that there is one pit left in Durham, and there may be one left in Scotland. Let us think about it. In 1979, there were 300 pits; now we are down to about 20. Let me tell the House something else. The Government can have as many fossil fuel levies as they like, and they can shuffle the pack as much as they like, but they cannot repair the damage that was done over those 18 years of Tory government.

Mr. Clifton-Brown: The hon. Gentleman is displaying some of the best rhetoric that I have heard since I have been in the House, but will he tell us, factually, how many pits the Labour Government closed in the 1960s and 1970s, compared with the number closed by the Conservative Government in the 1980s?

Mr. Skinner: I can give the hon. Gentleman a rough estimate—and the figures bear comparison; there is no mistake about that.
When I first came down to lobby Parliament in 1967, there was a Labour Government. A fellow who is now in the House of Lords—Lord Marsh—was allegedly the Labour Minister of Power. I had suspected him a long way back, when he wore a CND badge at his selection conference, because I had not seen him on the Aldermaston march. The badge got him the selection and, having been selected, he had a wonderful plan. It was almost like the Heseltine plan—not the Heseltine plan; the plan from Henley-on-Thames. Lord Marsh was going to close down the industry then, although he was not going to use the fossil fuel levy and all the rest of it. He had to be bundled out of office. That is what we did when we marched down here in 1967 and broke into the Labour party conference to save the industry.
I will tell the hon. Member for Cotswold (Mr. Clifton-Brown) the difference in the situation. We were able to force a Labour Government to change course. We tried it in 1991 and 1992 with the Conservative Government, and we could not shift them. Between 70 and 80 pits were closed in the period that the hon. Gentleman is talking about.
I know the industry like the back of my hand; I know about all the closures. I can tell the hon. Gentleman that one pit has been closed in the last 10 months. I could not lay the closure at the door of my hon. Friend the Minister even if I wanted to, because the pit has been closed by private enterprise. The hon. Gentleman must understand

this: once the coal industry is handed over to private enterprise, a Government cannot intervene, or can hardly intervene. Why? Because it is all about money—it is about shekels and it is about profit. The moment that Silverdale looked as if it could not deliver the goods, someone came along and said, "Close it."
My hon. Friend the Minister had better be aware of this point, as should every other hon. Member. Budge has about 17 pits. He is also mining about 16 million tonnes of coal a year from opencast. It sticks in my gullet to hear Budge asking the Labour Government for £300 million of subsidy from taxpayers' money, when he effectively stole the coal industry in the first place. With that subsidy, he could solve the problem himself, because all he has to do to save every single pit is turn off the tap of opencast coal production.
My hon. Friend the Minister should remember that point. When he has to make calculations, with or without a levy, he will have to bear it in mind that there are other components. He can say to Mr. Budge that we want to save the 20-odd pits that are left, but that he had better cut back on opencast. Changing the mineral planning guidance rules would make one hell of a difference. We could then save the deep mines and the miners who work in them.
My hon. Friend the Minister could do something about the French power that is coming over here. I do not go a bundle on this Common Market, and never will. I have never been caught up in it, unlike the right hon. Member for Wokingham, who is a Johnny-come-lately. He is anti-Market now, but at one time he was greatly in favour, like most of the Tories.
If 7,000 or 8,000 miners' jobs can be saved in Britain, we had better do that and not save the French nuclear power that is coming over here. If we can shuffle the fossil fuel levy in that direction, by all means let us do it. My hon. Friend the Minister should pay some attention to the question of imported coal, which comes from some of the most unlikely places. We cannot afford to chuck our few miners out of work while subsidising up to the hilt imported coal from Spain, Germany, Colombia and slave-labour economies.
The fossil fuel levy pales into insignificance compared with what can be done, but if Budge decides that a pit is not profitable, perhaps because it has run into some bad geology and is losing money, we can do nothing. Under nationalisation, we could save a pit by getting through the bad work, because there were enough profitable pits for the strong to help the weak.
Under privatisation, that will not happen: Mr. Budge will say, "That pit's unprofitable; it's going." Mark my words, if the coal industry remains in private hands, the owners of the few remaining pits will close them, just as they closed Silverdale, because it was not delivering. That is why the whole question is so important, over and above this tin-pot fossil fuel levy.
Ministers must pass the message on to Downing street or anywhere else that the only way of saving the few remaining pits, and taking them out of the grip of Mr. Budge and all the rest, is to bring the industry back into public ownership. That does not go down very well with new Labour, but it has to be said. It is much more important than some of the rubbish coming out of the mouth of the right hon. Member for Wokingham.
It has been a sad story, mainly because we had 18 years of a Tory Government who were determined to do the dirty on the miners and their families. By God, did they rub it in. Now we have to set up task forces in every single pit village to try to get work back into the communities. It is a sad story, all right.
I will give my hon. Friend the Minister the benefit of the doubt tonight, for what that is worth, but the decisions that we make on this little Bill are unimportant compared with what we have to do if we want to save the industry. If a Labour Government make the decision to save the 20-odd pits in Britain, it is possible to do it.
If we want to use the levy to shift a bit here and there and move the balance this way or the other, so be it: I go along with that. I believe in intervention and Governments moving in. I do not know whether it is old Labour or new Labour, or old-fashioned socialism. I do not believe in the principle of market forces.
I am like the farmers who ran the march the other week. They say they cannot produce food like the Mediterranean countries because they cannot compete with them. I am not against the principle of that dreaded word "subsidy". I believe that it is important to get people into work. I believe in welfare into work—in keeping miners in their jobs rather than chucking them on the scrap heap as window cleaners. We have got more window cleaners and taxi drivers in Bolsover and Barnsley than we have ever had before. That is a sad commentary on the proud pit villages that were destroyed by that lot opposite. I just had to stay to tell them.
The right hon. Member for Wokingham can spout as much as he likes. Some Tory audience might take it all in when he tells them, with his jerky movements, what he wants to do to save the industry. It is all but destroyed. The Labour Government must do something to save what remains of it. I will help my hon. Friend the Minister to do that. I had to do a little deal with him the other week to save concessionary coal; I hope that that show is on the road permanently. I will give him a hand with a shovel to save what remains of the industry, but I will not expect any help from that lot opposite, who destroyed the miners' jobs and left them to rot in nearly every pit village in Britain.

Mr. Deputy Speaker: Order. I did not want to stop the hon. Member for Bolsover (Mr. Skinner) in full flight. I have allowed a wide debate so far. Perhaps we can return to new clause 1. It would assist the Chair if mention were made of it.

Mr. David Maclean: Mr. Deputy Speaker, we were privileged that you did not stop the hon. Member for Bolsover (Mr. Skinner) when he was in full flight. I have been here 15 years. I would never patronise the hon. Gentleman, but I must say that it was a privilege to listen to him and to the passion that he put into his speech. I hope that you will not stop the Minister if he decides to respond to the hon. Gentleman's points. I would love to hear his detailed response to them rather than to what the hon. Gentleman called this shabby little measure or little piffle of a Bill.
It is to this little piffle of a Bill that I must turn. I oppose the measure, but I am a pragmatist. I accept that the Government have a huge majority; they can do what they like. They could do what the hon. Member for

Bolsover wants if they had the mind and the guts. As the Government will get the measure through, I say only that, if they are minded to try to square the circle by taking the illogical step of imposing a levy on fuel generated by alternative, green means while going into the fifth round of the non-fossil fuel obligation, I assume that it is because they wish to show their green credentials.
The Government do not want to abandon NOFFO. They will continue to fund alternative means such as extra hydro power in Scotland, which is awash with it, and extra wind power in parts of England that are fed up with that. To continue with that and impose a levy on electricity generated by green means is illogical. If that is what they want, I urge the Minister to pay attention and to accept amendment No. 3. As my right hon. Friend the Member for Wokingham (Mr. Redwood) said, it would give him the flexibility and scope to impose levies on different sorts of electricity generated by alternative or green means.
If the Minister is minded to do that, I should be particularly interested to hear his views on the sort of levy that he might impose on wind power generated in parts of the country where wind power might no longer be so desirable as it was in the past. If the non-fossil fuel obligation is intended to encourage alternative energy sources and technology that are on the frontiers of science, one of the areas of wind power that should be looked at is wind power generated by offshore means. I believe the technology to do that has been developed, and, with the subsidy which NOFFO grants, the technology is capable of coming on stream which would enable us to build much bigger, more substantial and more stable wind farms, slightly offshore—perhaps even quite a bit offshore—where they would not be an eyesore and a nuisance to constituents of mine living in the Lake district or close to it. I hope that the Minister will seriously address that point.
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I have written to the hon. Gentleman in the past suggesting that, as we have now had four rounds and are entering the fifth round of NOFFO, and as the previous Government's policy—slavishly followed by the present Government—has succeeded in encouraging alternative forms of energy and alternative renewables, the time may have come to look at the direction in which we are going. I know that the Labour party is reviewing most areas of policy—indeed, everything seems to be under review—but I wish that the Minister would put the policy on renewables, particularly as it affects wind farms on sensitive sites in this country, under urgent review.
The Minister has decided not to use the planning mechanism as a means of further tightening things up. Although that is a possible avenue which I should happily encourage a socialist Government who believed in extra planning controls to follow, he has decided not to go down that route. As he is taking in the Bill the additional instrument of imposing a levy on renewables, he should take up the suggestion in amendment No. 3 to give himself more flexibility. Rather than adopt a broad-brush approach and impose a levy on all forms of renewables, he would be able to target the levy on certain types of renewable that we might consider, after a review, are less appropriate now.
I have skirted the subject, but let me say bluntly that I am concerned that some operators have now decided that wind farms are a good cash cow. Because of the subsidy


that is available, parts of my constituency are now plagued by speculative planning applications, not for half a dozen windmills, but for up to 200 windmills in areas on the edge of the Lake district national park and other areas of outstanding natural beauty.
Although, at the end of the day, many of those wind farm developments have been turned down by the planning authority and, thankfully, by the Department of the Environment, Transport and the Regions inspectors, and although some will no doubt be turned down in future, they cause enormous concern and blight for a period of 12 to 18 months while the application goes through.

Mr. Peter Atkinson: Is my right hon. Friend aware that in my constituency, which his borders, there are six existing applications for wind farms, two of which are in the north Pennines area of outstanding natural beauty?

Mr. Maclean: My hon. Friend is absolutely right. In all corners of my constituency and that of my hon. Friend, which cover some of the most beautiful parts of Northumberland, there is a rash of planning applications in areas of outstanding natural beauty. No doubt many of those applications will be turned down, but the concern caused is considerable.
That offers another chance for the Minister to show his green credentials. I assume that he has not abolished NOFFO, for the simple reason that he does not want to tell environmentalists, "We are getting rid of the renewables policy." I accept that there are parts of the renewables policy which are perfectly sensible.
It is correct and appropriate to introduce a policy such as NFFO, which we did in 1995, to encourage alternative technology. Wind farm technology is now well proven. It works. The time has come for it to stand on its own feet without taxpayer subsidy. Let us take the subsidy that is available to land-based wind farms and push some of it towards new technology that would enable wind farms to be built offshore, for example.
That option is available to the Minister. I do not suggest that his whole Bill should be scrapped, much as I dislike its concept, but if he is going to go ahead with it, for goodness' sake let him take the appropriate power in amendment No. 3. Let him take the suitable power, so that he is able to target the levy towards those renewable sectors that we want to encourage and towards some of the renewable sectors where we already have sufficiency and of which we do not want any more, particularly in sensitive areas.

Mr. Ian Bruce: My right hon. Friend makes an important point, particularly as the Government, by press release, have told the world that we are going towards a 10 per cent. requirement of electricity generated. However, they will not tell the House or the world how they are going to achieve that. Clearly, one of the problems that has brought so many Labour Members into the Chamber is that that requirement will almost certainly mean a reduction in coal generation.

Mr. Maclean: My hon. Friend makes a good point. No doubt the hon. Member for Bolsover will fight that

corner as robustly as he did tonight. In many ways, my suggestion is a tiny help to him. I suggest that some parts of the renewables policy go too far. If the Minister wishes to divert some of the energy and some of the subsidy through NOFFO into alternative forms of renewables, rather than into large wind farms in inappropriate areas, he will have my full support.
While he is at it, will the Minister talk to Scottish Office Ministers? I have no political connection with Scotland at all now; I am merely an occasional visitor when I am allowed across the border. However, it still seems extraordinary to visit some favoured haunts in the highlands, an area that is awash with hydro—electricityScotland, I believe, is an exporter of hydro—electricityto see NOFFO being used in Scotland, encouraging the damming up of yet more small lochs, and to see small, unnecessary hydro-electric projects there, adding to the plethora of hydro-electricity it already has.
The Minister has a chance to use the amendment to be much more selective and incisive in the tools he uses to direct electricity generation and renewables policy. I disapprove generally of his approach, but, if he is minded to take it, let him adopt the scalpel rather than the sledgehammer, which he has in the Bill.
I hope that the Minister will respond to my points, but, if he is not minded to do so, I would dearly love him to respond to what the hon. Member for Bolsover said—if not tonight, then at some other point. This debate will run and run.

Mr. Hammond: The hon. Member for Bolsover (Mr. Skinner)referred to this measure as a tin-pot fossil fuel levy. The whole point about the levy is that it is unlimited in its potential extent. At its height, when the levy was 11 per cent., I believe that it raised about £1 billion a year, which by anyone's standards—and whatever the purpose for which it is applied—would hardly be considered a tin-pot amount of money. That sum could be used seriously to tackle many of the problems in different sectors of the energy industry.
I am happy that there is only one group of amendments on the amendment paper, which suggests that we might get home for breakfast, but, with your permission, Mr. Deputy Speaker, I should like to discuss the amendments and the new clause separately, because they have a certain logical consistency.
Amendment No. 5 would add to the wording of clause 1(3), to make any extension under section 33(9) of the Electricity Act 1989 subject to affirmative resolution of the House of Commons. The purpose of the amendment is simply to ensure adequate opportunity for scrutiny on a matter that gives considerable cause for concern not only to Conservative Members but, as we discovered on Second Reading and in Committee, to Liberal Democrat Members, for a variety of reasons.
Our principal concern is that clause 1(3), which inserts a new subsection (9) into section 33 of the Electricity Act 1989, is something of a blunt instrument, which would allow the Secretary of State to remove the definition of leviable electricity altogether, so that all electricity became leviable, or to leave the definition exactly as it is. Clause 1(3) does not allow the Secretary of State any discretion to extend the levy to certain areas that are not currently leviable, without at the same time hitting the full range of unsubsidised renewable technologies and any other technologies that currently escape the levy.
It has been suggested by my right hon. Friend the Member for Penrith and The Border (Mr. Maclean), who is no longer in his place, that large-scale hydro-electric projects in Scotland might properly have the levy extended to them. We have tabled amendment No. 3 specifically with the purpose of giving the Secretary of State the ability to add power-generating resources selectively to the scope of the levy without forcing him or her to extend it across the range of all electricity.
It is common ground between Labour and Opposition Members that the NOFFO regime has been a success, not perhaps principally in the large amount of electricity that is generated under it—although some 200 or so projects are approved under the NOFFO arrangements, the amount of electricity generated is still quite small—but in terms of the convergence that has already been achieved. It is now a realistic probability that some of the technologies will reach market pricing and that we will shortly see such electricity sold directly into the retail market as green electricity purchased as such by consumers.

Mr. Ian Bruce: It would have been extremely helpful to the Standing Committee to hear from the Minister what he intended to do with the non-fossil fuel obligation. If we could have had a clear picture of what he intended in the next round for NOFFO, we could have been very much more helpful and worked on a bipartisan approach. Is it not ridiculous that the Minister's right hon. and hon. Friends are urging him to take action on things such as clean coal, yet he still will not answer Lord Ezra or anyone about exactly what he intends to do, or what other non-fossil fuel obligation he intends to require?

Mr. Hammond: My hon. Friend anticipates the point that I was about to make. A future amendment of section 32 of the Electricity Act 1989 may enable the levy to be used in support of clean coal technology or any other new or existing technologies. It would be interesting in that context if the Minister could tell us the current status of the private Member's Bill introduced by Lord Ezra in another place. I am surprised that the hon. Member for Bolsover did not mention that Bill. The Minister was probed on it in Standing Committee.
The noble Lord was given to understand that the Government would treat his Bill benevolently when it reached this place. By the time of the Standing Committee's proceedings, the Minister had not answered a letter from Lord Ezra; we would be interested to know whether the Government intend to make time for that measure when it gets to this House. That would have a significant impact on the matters we are debating this evening.
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Perhaps the Minister will also tell us what steps have been taken—I know that he has taken some already—to clear with the European Commission any moves that the Government might be minded to make to allow the subsidising, through the NOFFO mechanism, of clean coal technology; or to allow other measures to help the coal industry. Such measures would not, I believe, become possible until they had been cleared by the Commission.
The levy is relatively low at the moment—less than 2 per cent.—but at its peak it was set at 11 per cent. At that level, it could provide a technology not subjected to

the levy with a powerful competitive edge over one that was subjected to it. In pursuit of environmental and other objectives, it might be useful for the Government to have the power to include certain new technologies in the levy, without necessarily extending it to all technologies.

Mr. Ian Bruce: My hon. Friend makes an important point about the amount of money raised under the previous Administration, when there were difficulties with the nuclear industry. That money is no longer included in the price of electricity. The mechanism involved is a very powerful one; yet we still cannot find out from the Minister by how much he intends the levy to rise.

Mr. Hammond: My hon. Friend is right. Any measures that the Minister was minded to introduce to extend the use of the NOFFO arrangements to support clean coal technology would require an amendment to section 32 of the Electricity Act 1989. Lord Ezra, when the Bill was introduced in another place, sought to include such a provision, but was ruled out of order.

Dr. Ian Gibson: On a point of order, Mr. Deputy Speaker. Following the blistering attack by my hon. Friend the Member for Bolsover (Mr. Skinner), may I take it that the shadow Front-Bench team has been chased from the Chamber? The hon. Members for Daventry (Mr. Boswell) and for Chesham and Amersham (Mrs. Gillan), and the right hon. Member for Wokingham (Mr. Redwood), have all disappeared from the scene. What credibility can we ascribe to the remaining members of a party whose Front-Bench team disappears in this manner?

Mr. Deputy Speaker: That is not a matter for the Chair.

Mr. Hammond: We will do our best. Perhaps our right hon. and hon. Friends have gone to the Tea Room for a short break, in anticipation of lengthy proceedings.

Mr. Ian Bruce: My hon. Friend will know that we operate a lean and mean team. With so many DTI Bills coming through, and with so many DTI Ministers—with all their flats—dealing with them, Conservative Members still appear able to debate these matters cogently while encountering a great deal of difficulty even getting Labour Members to get to their feet.

Mr. Deputy Speaker: Order. Perhaps we can now return to the amendments.

Mr. Hammond: I will not be tempted down the route that my hon. Friend offers me.
Amendment No. 2 offers the only means, within the limited scope of the Bill, of allowing the Minister to show his practical support for clean coal technology. It is a small start. How much excluding that technology from the scope of the levy would be worth would depend entirely on the level of the levy at the time. Clearly, if the levy was 11 per cent., it could be a considerable advantage which might make a significant difference to a private investor considering investing in clean coal technology for retrofit. If the levy was only 2 per cent.—[Interruption.] I am sorry: I have been tempted off my track by the Minister.
The current problems in the coal industry have focused attention on support for coal mining and coal burning processes. The issue is not just the price agreed with the generators, as much of the press speculation and comment over the past few months has suggested. It is also the contradiction, as my right hon. Friend the Member for Wokingham (Mr. Redwood) said, between the Government's commitment to reduced emissions of greenhouse gases, which we all welcome, and the Government's undoubted desire to help the coal industry if they can. Even before the election they were balancing on a tightrope, trying to satisfy the green lobby while masquerading as the friend of the coal mining community. Now they must decide on which side of the tightrope they will fall off.
The only route out of the problem for the Minister is to use the mechanism of the NOFFO—section 32 of the 1989 Act—in the future to support clean coal technology, while not negating the Government's commitments on greenhouse gases.
We are trying to draw out the Government's policy. We know that a number of reviews are taking place. Perhaps it would have been better if the Bill had been limited to subsections (1) and (2) of clause 1, which would have made it truly just a technical measure, as the Minister has suggested at various times that it is.
By including subsection (3), however, the Minister has given himself powers considerably to extend the scope of the levy. In those circumstances, we must probe him about his wider intentions. Had he completed his review of the future of renewables, funding and the NOFFO mechanism and then introduced a new Bill that amended section 32 of the Electricity Act 1989 and widened the scope of the levy as subsection (3) does, that might have been more logical.
We need to know whether the Government intend to use section 32 to try to support the coal industry. Are they interested in using the levy as a tool to support the industry, as our amendment No. 2 suggests? What levels do the Government envisage for the levy in the future? We would not necessarily be hostile to a higher levy if it made sense, but we are not minded to write blank cheques for the Government.
We want to ensure through the amendments that there is a proper system of reporting back to the House, and that any measures that the Government introduce to extend the scope of the levy will be properly reviewed in Parliament. We need to know how they will reach their ambitious emissions targets, how much that will cost, and how they will finance those costs. We seek openness and debate. What I have suggested the Government might be considering would not necessarily be wrong, but it would be wrong to sneak it in through the back door of subsection (3) and other provisions of the Bill.
If support for clean coal and other technologies through the levy is a coherent part of the Government's energy policy in the long term, and not just a short-term fix, it might be sensible to use the mechanism of the non-fossil fuel obligation. We will keep a check on what the Government do in that respect. For that purpose, we have tabled amendment No. 6. We do not suggest that the Government should not contemplate increasing the level

of the levy, but, if they do increase it, that should be subject to approval by Parliament, so that a proper check can be maintained.
In discussions such as this, it is important not to forget that, alongside the environmental argument for supporting alternative technologies and managing the fuel equation in our electricity generation industry, there is a second pillar of argument for supporting new energy technologies: security of supply. That tends to be an on-off issue. At certain times—for example, in 1973 and during the Gulf war—security of supply becomes extremely fashionable and the driving force in particular areas of energy policy. At other times, when our energy supply does not seem to be seriously threatened and our energy security is not obviously under threat, the issue slips out of sight, and the environmental focus tends to take over.
Anyone who has attended any of the excellent seminars organised by the various strategic and international study institutes with which London is blessed will realise that, although our energy supplies do not appear to be under any imminent threat, many quite plausible scenarios suggest that we would be wise to consider energy security as an important part of the equation. That is a second, and quite legitimate, reason for encouraging indigenous energy sources—although I do not suggest for a moment encouraging them at any cost.

Mr. Clapham: Does the hon. Gentleman accept that the previous Government and the one before that set us on a course of over-dependence on gas? In light of that, it is extremely difficult for this Government—who are trying to do something positive for the mining industry—to be effective.

Mr. Hammond: Doing something positive for the mining industry includes immediately approving new gas-fired power stations, which the Government said they would not do. Gas is an indigenous energy source in the United Kingdom—at least at the moment—unlike some of our other energy sources.
I do not suggest that we should pursue energy security at any cost. However, if security can be achieved in a way that is compatible with a sensible environmental policy at a sensible cost, that is a legitimate objective to pursue. Sections 32 and 33 of the Electricity Act 1989 may be a legitimate route for achieving that objective as well as environmental objectives.

Mr. Ian Bruce: Looking back at the debates on the original electricity legislation that introduced the non-fossil fuel obligation, one notices that the cost differences between gas, coal and nuclear and wind power then are incredibly different from those levels today. The non-fossil fuel obligation and the fossil fuel levy give the Government flexibility and should be retained. We are rather surprised that the Government do not agree.

Mr. Hammond: The flexibility that I believe the amendments would give the Government could prove useful to the Minister. For the second night in a row, I find myself in the somewhat unusual position of urging the Government to give themselves more discretionary power. We can envisage the advantages that that would have.
I turn now to amendment No. 4, which I think stands a little apart from the other amendments, in that it seeks to protect electricity generated from renewable technologies


under qualifying arrangements. The amendment seeks to prevent a situation whereby any given source of electricity supply would be subject to a levy that might be more than the subsidy being received in respect of that electricity.
We might contemplate that situation when the price of renewable energy generated from certain technologies converged with market prices. We might see that the subsidy payable is quite low—or very low indeed—at a point in the not too distant future, perhaps under some of the bids that the Minister is receiving under the current NOFFO round.
If at some point the levy were to be raised from its current low level to 5 or 10 per cent.—somewhere within the range that has been experienced since the mechanism was introduced—a technology-based renewable energy generating station could pay more levy than it receives in subsidy. I think that the Minister had some sympathy in Standing Committee for the argument that it would send the wrong signals to the renewable energy generation industry were we to suggest that, as it approached convergence and lost its subsidy, it might become a net payer of levy. We would not like to send it that message.
All these amendments have a certain coherence. Their overriding theme is the need for transparency and accountability as the Minister seeks to use the mechanisms that are available to him to deal with the issues. There is no suggestion that we would not be sympathetic to what he might have to do, but there is a desire to ensure that the House is properly informed, and that proper debate takes place.

Mr. Ian Bruce: I notice that the Chamber is starting to fill up with Whips. The Deputy Chief Whip is present. Obviously, he is a little worried that the Whip on duty is the same one who was on duty last night when we were debating the National Minimum Wage Bill. Perhaps the Deputy Chief Whip is concerned that we may talk through the night. I can reassure him that it is not our intention to delay the House unduly, but the Bill before us is important. The Minister, who takes this matter extremely seriously, will want to respond in full to matters that have been raised in this full and sensible debate.
Whips are, supposedly, the silent people. In Committee, they were keen to ensure that the Committee was filled with the Stepford tendency of new Labour MPs who would not—

Mr. Deputy Speaker: Order. I do not want to know what the Whips did in Committee. It has nothing to do with me. We have amendments before us and the hon. Gentleman will speak to them.

Mr. Bruce: I am most grateful to you, Mr. Deputy Speaker, for reminding me not to be tempted by such important people as the Deputy Chief Whip.
It is important that the House has the opportunity to have a full debate. It has allowed the hon. Member for Bolsover (Mr. Skinner) to speak on a subject about which he is knowledgeable and passionate, and his speech was a treat to us all. Indeed, he spoke directly to the substance of the amendments before us. We also had a treatise from my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), which went into great detail about the amendments that we tabled.
I shall respond to any interventions that hon. Members may wish to make. If they wish me to go wider, I should be happy to do so. I shall talk about the background to the amendments and why it is so important that the Minister is given the opportunity at this early hour to tell the House what is in his mind about where we are going. However, before I start my full remarks, I should speak briefly about the non-fossil fuel obligation, which is part of section 32 of the Electricity Act 1989 and concerns the protection of public interest, and section 33, which the Bill will amend. Those terms can confuse people about exactly what is intended.
You will know, Mr. Deputy Speaker, that, in deciding which amendments to select for debate, Madam Speaker and her Committee are always extremely wise and beyond criticism. Madam Speaker was correct not to select the three amendments that I tabled—

Mr. Deputy Speaker: Order. No comment should be made on amendments which have not been selected. There was good cause not to select them, and the House knows that. Nor should the hon. Gentleman deal with the origins of the amendments. The amendments are here for debate, and that is what the hon. Gentleman must do.

Mr. Bruce: I am grateful to you, Mr. Deputy Speaker, for keeping me on the straight and narrow.
The Minister may argue, probably correctly, that section 32 of the Electricity Act 1989 already contains powers to promote clean coal technology, and that may well be a reason for rejecting the new clause. We are simply seeking, as we did in Committee, to tease out whether the Government need various powers. It is important to examine the Government's intentions.
The hon. Member for Bolsover, like other hon. Members, will want the Government's fuel policy to be sufficiently flexible. The levy should not go on specific non-fossil fuels when one of the original purposes of NOFFO and the levy to pay for it was to provide for the cost of closing nuclear power stations when they came to the end of their life. That levy has been extremely effective. Electricity prices have fallen since its introduction, rather than risen, as was the suggestion then. The Government may want that fall to continue or they may want to ensure that they can increase electricity prices in the future to pay for Kyoto. No one has yet told us how our obligations under Kyoto will be paid for.
We already know that the Government plan to put taxes on aggregates and landfill, and to encourage the burning of waste to generate electricity—a controversial subject. This evening, I attended a dinner of the Institute of Wastes Management, where the problems of people not wanting what is considered to be invasive technology in their back yards was discussed.

Mr. Hammond: Does my hon. Friend agree that amendment No. 4 would allow the Minister to distinguish between technologies in the way that he is suggesting is necessary?

Mr. Bruce: Indeed. Section 32 helps the Minister to deal with the protection of public interest—that is what the section is called in the Electricity Act 1989. The additional flexibility is designed to enable the Minister to deal with difficult situations.
The mechanism is still being used effectively by the Government and they say that they want to continue to use it. The fact that that mechanism has stood the test of time is a tribute to our Conservative predecessors, who obviously got it right. It is rare for a mechanism which was heavily criticised to have stood the test of time. We should not want Ministers and Whips to have to find more parliamentary time to introduce yet another measure when it was decided how the obligation would be imposed. Our amendment offers the Minister a new mechanism to enable him to do a better job for the future and to tell us about funding.

Mr. Hammond: Does my hon. Friend agree that amendment No. 3 gives the Minister every power that he would have within the Bill as drafted, plus some additional powers to use subsection (3) in a more subtle way than is currently offered?

Mr. Bruce: I am loth to say that the Minister would not want to be subtle. However, his response in Committee demonstrated that he wanted to bamboozle us. In a rather aggressive manner—I know that that is just his way and that he does not mean anything by it—he seemed to be telling Conservative Members that anything that we do to help him so that he can help the public and his friends in the coal industry should be rejected at every opportunity.
The cap on the levy is dealt with in the amendments. That could lead one to believe that we are suggesting that the non-fossil fuel obligation should be used for all sorts of additional purposes and also that it should be held back. It is somewhat contradictory. We are saying not that the non-fossil fuel obligation and the levy should never go up beyond the level that we are suggesting, but that, if it were to be increased, the House should have an opportunity to discuss it. Those are crucial issues for the future.
The environmental lobby is keen to ensure that we have as much information as possible about where it believes that the country should be going. The Government are looking at all sorts of things, including their transport policy. They are all asking what we should be doing for Kyoto. They are asking what we should be doing for the future.
We are not talking about no-cost options. It is important to know that the Minister has a power that could put up electricity prices substantially—I do not believe that there is any limit. The Minister could wake up one morning and be told by the Chancellor that he is trying to do something for Kyoto but that he does not want to do it by general taxation because he would be found out and people would be critical. In those circumstances, the price of electricity could be increased by an order, which hardly needs to be debated in the House.

Mr. Hammond: Does my hon. Friend agree that the levy has something of the nature of a hypothecated tax, which has the extraordinary characteristic of being self-collecting? The spending Department spends and it automatically collects the right amount through the mechanism of the levy.

Mr. Bruce: Indeed. It is a subtle and clever mechanism that a hypothecated tax has been operating in the United Kingdom for over a decade without anybody noticing. People have noticed electricity prices going down, despite Labour propaganda suggesting that prices have been going up.
If we are to be honest, it is important that people should know the costs. My hon. Friend the Member for Runnymede and Weybridge knows that the levy, which was introduced by a Conservative Government, transferred existing costs of nuclear power on to the coal industry, as there was inequality between those two forms of energy. Because nuclear power stations were nationalized—nobody seemed to care that they were uneconomical—the extra costs had to be found. A subtle and clever mechanism was brought in, and any Chancellor who recognises how clever that mechanism is will be tempted to use it. Despite the fact that the Treasury is not speaking before the Budget, perhaps it is listening to the debate. It may think that this is an ideal way to raise additional taxation.
The House would like to discuss this matter further, and I am disappointed—as are my hon. Friends—that no Labour Member, other than the hon. Members for Bolsover and for Barnsley, West and Penistone (Mr. Clapham), who intervened passionately, has taken part in the debate. I shall now allow the Minister to respond—assuming that I cannot tempt any Labour Member to express is views. I would not want to hog the limited time we have available, and I should not want to delay the start of the Third Reading debate.

12 midnight

Mr. Battle: This is a Bill of two clauses, which deals with the type of electricity on which the fossil fuel levy can be charged. The levy is the main means of raising the funds to support renewable technologies for the generation of electricity, and the Bill will ensure a level playing field in the generation of electricity. It will maintain the existing levy on nuclear energy generated in England and Wales and will bring under the levy for the first time the imports of nuclear electricity—a matter to which my hon. Friend the Member for Bolsover (Mr. Skinner) referred. The imports from France of nuclear energy will be brought under the levy. I accept that it is a small measure, but the Bill will shift the balance in favour of renewables and will ensure that the nuclear industry pays its share.
It has been an interesting debate. We had a wide-ranging speech from the right hon. Member for Wokingham (Mr. Redwood) who, sadly, had to leave us. We have had contributions from the hon. Members for South Dorset (Mr. Bruce) and for Runnymede and Weybridge (Mr. Hammond). I heard critical mutterings, but let us be fair—those hon. Members have been present throughout our proceedings on the Bill—on Second Reading, for the whole of the Committee stage and tonight. At least two Opposition Members are seriously interested in the Bill, and I have listened to what they have had to say.
Amendment No. 2 proposes that electricity supplied from clean coal generating plants could be exempted from the levy, but sadly there are no such generating plants operating in Britain. Simply exempting electricity supplied from such stations from the scope of the levy would not give sufficient incentive for such plants to be built. We are looking carefully at how to encourage clean coal technology. We already provide support for the development of clean coal technology under the foresight programme; some £4 million has been provided this year alone.

Mr. Ian Bruce: The Minister has clearly done some homework on clean coal. Is the technology ready to go, assuming that a NOFFO bid was allowed and we had some response?

Mr. Battle: There are one or two rumours of interest, but no more than that. We are looking for clear proposals. I hope that proposals for clean coal technology at an affordable price can be introduced quickly.

Mr. Norman Baker: Will the Minister clarify the Government's position on the coal industry? Do they believe that the coal industry is at its optimum size? Should it be expanded, altered to include clean coal technology, or further reduced for environmental reasons?

Mr. Battle: We see a future for deep-mined coal in Britain, and we want clean coal technology as a means of ensuring that. We shall work to that end, but we inherited incredible difficulties from the previous Government.
Amendments Nos. 3 and 5 provide for the scope of the levy to be extended to new categories of electricity, but that approach differs from the approach envisaged in the Bill. I emphasise that the Bill simply amends section 33 of the Electricity Act 1989. For example, had we not acted to extend the levy to the nuclear industry from 1 April this year, as the primary nuclear contract set by that Act runs out, nuclear generators could have benefited from the resulting market distortion to the tune of £60 million to £70 million a year at the expense of customers. That is why we have placed the levy on nuclear energy, including that generated in France. The approach proposed in amendments Nos. 3 and 5 is based on the continuation of that distortion. We introduced the Bill in the first place to get rid of that.

Mr. Hammond: I accept what the Minister says, but he misrepresents amendment No. 3, which simply seeks to give the Secretary of State the power, should she wish, to extend the levy sector by sector to other types of technology, rather than extend it to all forms of electricity. How could the Secretary of State object to being given more power to act more subtly if she wants to?

Mr. Battle: I was coming to precisely that point. Perhaps I should accept no more interventions but try to answer the debate. The approach proposed in the amendments is based on the continuation of distortions. The problem with that is that support is not closely targeted on the companies that need it, nor is the amount of extra revenue that they can generate in the market tied to the amount of support that they need. In other words, such an approach would be wasteful and inefficient, and would not achieve the objectives that the hon. Gentleman suggests it would.
Our approach is better, because we are signalling, through the Bill, that one day all electricity may be leviable. We hope that green, renewable sources of electricity generation will be able to compete on equal terms with other forms of generation in the future, and I see no reason why such electricity should not then be subjected to the levy. The effect would then be that resources could be targeted closely on those renewable generators that need and deserve support, which is precisely the point made by the right hon. Member for Penrith and The Border (Mr. Maclean). I agree with him. The amount of support that those generators receive can be measured according to their needs. We believe that that would be a more effective way to proceed.
At present, most renewable generators cannot produce electricity at prices that are competitive on an open market. Amendment No. 4 fundamentally misunderstands how NOFFO operates. As Opposition Members who have been present throughout the Bill's proceedings know, we have spelt out the fact that the levy is paid to people who produce the electricity: it gives them the difference. Opposition Members are nodding, so we know where we stand. There is therefore no reason to give further support, as the amendment seeks to do.
Amendment No. 6 seeks to ensure that the amount of levy paid by licensed electricity suppliers stays the same or falls. That is short-sighted because we cannot predict what will come in the bids for NOFFO for renewables. The procedure is demand led. If new schemes come forward, even those set up by the previous Government, we shall not shut them down and come back to the House every time. We want renewables to be supported, which is why we have the Bill.

Mr. Hammond: The amendment does not say what the Minister says it does. It says that, if the levy is to rise, the Secretary of State must come back to the House and get that rise approved by means of a statutory instrument, subject to the approval of the House of Commons. What is wrong with that?

Mr. Battle: It is late and the hon. Gentleman was up late last night, too. He seems unable to listen. If bids 3 and 4 for the NOFFO projects come through, as they will this year, is the hon. Gentleman saying that we must come back to the House for every renewable scheme? There were hundreds of such schemes. The idea is nonsense and would hold the whole process up. I do not think that that is the intention behind the Opposition amendments. NOFFO 3 and 4 projects have yet to come on stream and, as a result, the overall amount of support could rise.
Opposition Members aired the same thoughts under different guises in Committee. Furthermore, the Bill has already passed through the other place and had a good airing there. We gave the Opposition plenty of time in the Standing Committee. Indeed, in the other place the Opposition spokesman, Lord Fraser of Carmyllie, said:
Indeed, but for that rare aberration of political judgment by the British people on 1st May, I have no doubt that I would have been introducing this self-same Bill from the other side of the Chamber. In those circumstances, it is unnecessary for me in any way to


rehearse the elaborate and detailed argument which the noble Lord usefully gave to the House in support of this measure".—[Official Report, House of Lords, 18 July 1997; Vol. 581, c. 1144–45.]
I could not agree more, and I ask the Opposition to withdraw their new clause. They have made their points, and we have taken them on board.

Question put and negatived.

Bill read the Third time, and passed, without amendment.

Sudan

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

Rev. Martin Smyth: I welcome the opportunity to raise the subject of Sudan. For many years, I have been concerned by the fact that that country has largely been ignored by the media and the world at large. More than 1.5 million Sudanese have died, and more than 4 million, in a population estimated at about 27.5 million, have been displaced. As the conflict appears to be black versus black, Arab versus black, or Muslim versus Christian, it has not caught the imagination or interest of the world.
As a guest of the National Assembly, with two others from the United Kingdom, I visited Sudan for a week in January. Our hosts treated us with great kindness and courtesy, and I met a variety of people, formally and informally.
A German who had formerly lived in Sudan and was visiting from another African country, told me that the international sanctions had forced the National Islamic Front regime to develop its own economy, with some success. In his opinion, that was in contrast to the earlier Mandi Administration, which received lavish international aid but did little to improve the lot of the ordinary people in the Sudan.
I know that the Government support, as I do, the Intergovernmental Authority for Development process—but has the Minister found, as I did, that, as ever in a situation of conflict, the first casualty is truth? Propaganda takes over, with a bias one way or another.
Many issues could be raised. I recognise some other problems that could be examined in depth—problems that any Administration, in the Sudan or anywhere else, would have to face. The devastation of the south and the resulting shift of population means that the percentage of southerners in the Khartoum area has risen from 1 per cent. to 30 per cent.
Those displaced persons live in what is virtually a dust bowl, in shanty accommodation. Charges have been levelled that the authorities—mainly, I suspect, minor functionaries—have followed plans under which unregistered churches are demolished to make way for roads.
People have been removed to other areas and left to build their own houses. No real sanitation is provided on those estates. Schools also have been affected. The human rights committee of the National Assembly has a virtually impossible task in attempting to adjudicate on any charges.
Islamic activists have been moved into areas that are occupied by Christians who have already been displaced. Islamic activists are advised of community meetings, so that they might vote on local issues. The consequence is that the authorities can claim that they are acting at the behest of local people.
I ask the Minister whether the United Nations rapporteur for the United Nations Commission on Human Rights has updated his October 1997 report, and whether he has been free to move unrestricted in Sudan.
On a brief visit to Juba, we heard from Muslim and Christian leaders that their people had co-existed in friendly relationships, and mixed at different levels. Nevertheless, there was evidence of appalling need in that area. The National Islamic Front said that it would rebuild when the war was over. However, the decay and lack of proper infrastructure was reflected in the people's low morale and poor condition.
Is the Minister confident that all possible action is being taken to ensure that humanitarian aid is available in all areas? Is he aware, for example, that the Sudanese Administration have regularly siphoned off aid, and diverted it to soldiers or to Muslim groups that they claim are as much in need as others?
While we were in Khartoum, a Catholic Fund for Overseas Development delegation that was accompanied by the Roman Catholic Archbishop of Liverpool advised us that tools and seed that had been destined for the south had been so delayed that they could not be used when they arrived, as the time for planting and the rainy season had passed. Consequently, there was no development of the harvest. Moreover, food that was sent where it was needed had not been distributed, but was held in Government stores.
What representations have been made on the imprisonment and torture of citizens in Sudan? I discovered that the Presbyterian minister in Juba had been arrested by security police, and beaten without trial or sentence. Although allegations of illegal conduct by him were given as the reason for his arrest with others, no one was able to provide a witness. He was therefore released. I did not meet him during my visit, because he had moved out of the country, to Nairobi, to recuperate from his beatings. Such incidents are typical in Sudan.
Has there been any response to the Government's representations on the abduction of young people, who are forced into service in the defence forces? When I raised that matter with the authorities, they attempted to compare the practice with national conscription in the United Kingdom. I was happy to remind them not only that conscription in the United Kingdom no longer exists, but that, even in wartime, there is an opportunity for conscientious objectors to perform first aid or other civilian activities rather than in military operations.
I certainly do not believe that such conscription should be sustained as a way of treating fellow citizens, carrying them off into slavery. Does the Minister accept that there is evidence that such a practice continues in Sudan? Does he give any credence to the National Islamic Front Government's line that that practice is not really slavery, but a tradition among the people—that it is how they live? Such a line seemed rather far-fetched.
Conversely, I could not accept the criticism of those within and outwith Sudan who condemned groups—from Switzerland and other countries—that were concerned about the problem, and provided money to ransom slaves. How long will such practices be supported by those who do nothing either to stop them or to redeem slaves?
I found evidence of duplicity when it was claimed that the south could vote in four years for independence or for a federal Sudan. While some Christian leaders were hopeful, I formed the opinion that most Muslim leaders were determined to keep Sudan as a whole, no matter what happened, and to advance the concept of Arabisation and Islamisation.
There was certainly a pattern historically, according to some Christian leaders I met who were arguing for an independent south. A few had served in the Mandi regime. It was the old policy of "divide and conquer", which has ever been a powerful and persuasive policy of Governments of one sort or another.
The Muslim view of an Arabisation/Islamisation of the Sudan was patent. As a result, disillusion has crept in. Hence the split between the former southern commander Kerubino Bol—a signatory to the 21 April 1997 peace agreement—and the Government. He appears now to have allied himself to the leader of the Sudanese People's Liberation Army, John Garang.
This surfaced while we were there. News broke of rebel troops surrendering in Wau, the third main city. For my benefit, Muslim leaders assured me that—unlike those in Northern Ireland, where we were arguing for the handing over of weapons and decommissioning—they were kind-hearted, and were allowing people who were coming over to their side to maintain their weapons as a sign of good faith.
A few weeks ago, I discovered here in Westminster, from other sources, that some old weapons had apparently been handed over for new. Sudanese representatives, however, advise me now that this was a Trojan horse group. At least, several hundred of them—armed with modern, in the Sudanese view, largely Soviet-block assault weapons—co-operated with an SPLA attack. They alleged that they had been led by Commander Kerubino, who is currently missing. He was a Dinka, who had had a disagreement with Riek Machar, a Nuer. Machar, as the Minister will know, is the appointed chairman of the southern executive, not elected by the people but appointed by the regime.
After initial success in the centre of the city of Wau—having taken over some strategic places—the rebels were ultimately repulsed, but still hold the outskirts of the town. Because of the link with the Dinka leader, the Dinka civilian population were attacked savagely by Government forces. Has the Minister any recent news of developments in that regard?
Significantly, Wau was the centre where, according to a United States report, Iraq helped Sudan to develop chamical warfare capabilities in the mid-1990s. I know that, in a Question Time relating to Iraq, the Foreign Secretary had no evidence of that. Will the Minister now say whether there is any fresh evidence? On that occasion, the Foreign Secretary said that he would inquire into it.
What representation has been made concerning attacks on civilian targets? Will the United Nations, which seems divided on many matters, now seek to implement UN resolutions? Sometimes, as in the House, resolutions are made without much resolution. In particular, will the UN implement a no-fly zone, as in southern Iraq, to diminish NIF capacity to wage war against its own people by bombing them?
In the regrettable plane crash in which Lieutenant-General El Zubei Mohammed Salih lost his life with six others, one of those killed was Arok Thon Arok, a southern leader who had signed the agreement with Riek Machar. At the public mourning, Dr. Hassan al Turabi, the ideological leader of the Islamic regime, announced, according to The Guardian of 19 February, that Arok Thon Arok was a last-minute convert to Islam. The news was greeted with triumphant shouts from several thousand mourners: Islamisation even in death.
The reality was different. Six bodies were laid out in white winding sheets, each covered by the national flag. Arok Thon Arok's corpse, in a coffin, was finally released to his family, after some debate, for a Christian burial. In our modern world, with its emphasis on pluralism, people must be given true liberty within the law—we understand that Sharia law was not to be extended to the Christian and Animist communities—to follow their religious and political convictions. I believe that that is Her Majesty's Government's position. Should not Sudan share that policy with the free world?
I express my appreciation and gratitude to our ambassador and the embassy staff in Khartoum, who were very helpful in arranging meetings.

The Minister of State, Foreign and Commonwealth Office (Mr.Tony Lloyd): I congratulate the hon. Member for Belfast, South (Rev. Martin Smyth) on securing this debate. I know that he has been a Sudan watcher over many years, and I place on the record my appreciation of the measured way in which he introduced the debate. I will try to answer his specific questions, but there are one or two matters on which I will not comment tonight, simply because I cannot give an answer. I will reflect on the debate in the cool light of day—which will be sooner than we had expected—and write to him.
Sudan is a troubled country, racked by civil war, divided against itself. Much of the south has taken up arms against the Government in Khartoum and the north. In the 14 years of bitter fighting, the conflict has become more than simply north against south, if indeed that was ever a realistic description.
The conflict has been complicated by tribal and other divisions among the southerners, some of whom, as the hon. Gentleman said, are Christian, while some are Muslim and others Animist. The Sudanese People's Liberation Army has been active for many years in the south, but it has now joined the parties of the democratically elected Government who were overthrown in the 1989 coup to form the National Democratic Alliance, under which umbrella the conflict has spread to the east of the country.
As the hon. Gentleman said, Britain is one of a number of countries seeking to help to bring this sad state of affairs to an end. While those efforts continue, our policy towards Sudan reflects our concerns about human rights abuses in both the north and the south of the country, with the Sudanese Government's refusal to countenance multi-party democracy.
We are also concerned about the aggressive way in which the Sudanese Government have pursued the civil war, and about their involvement with terrorist groups and regional insurgencies that threaten Sudan's neighbours—in particular, their support for the Lord's Resistance Army, a brutal organisation that is responsible for killings, abductions, lootings and even, almost certainly, the sexual exploitation of children in northern and western Uganda.
The Government and civil society in this country have in no sense abandoned Sudan. As the hon. Gentleman knows, we maintain the embassy in Khartoum, and I was delighted to hear his congratulatory remarks about the role

of the ambassador. A senior official from the Foreign and Commonwealth Office visited Sudan in July 1997 for discussions with representatives both of and against the Sudanese Government.
We keep open links with the Sudanese opposition. During the last seven months of 1997, the Minister of State, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), met the former Prime Minister, Sadiq al Mandi and the NDA leader, Muhammed Osman al Mirghani, as well as the Sudanese ambassador.
A series of meetings in 1994 and 1995 appeared to be making progress. In May 1994, IGAD adopted a declaration of principles, which includes the right of self-determination for all Sudanese people, and the separation, as the hon. Gentleman mentioned, of religion and state for the settlement of the conflict. We supported that process, but it ground to a halt in May 1995 in the face of the Sudanese Government's rejection of the declaration. The Friends of IGAD and, more recently, the IGAD partners forum that replaced it, continued to encourage the IGAD process.
Military pressure from rebel groups and diplomatic pressure from outside persuaded the Sudanese Government to resume the IGAD process on the basis of the declaration of principles. The first round was held in Kenya in October and November last year. The next round will be in April, with further contacts after that.
We believe that the regional approach offers the best chance of the comprehensive settlement to the conflict that the people of Sudan need and deserve so much. I say "comprehensive settlement" because the conflict in Sudan is more than a question of north versus south. A number of Sudan's ethnic groups have joined the struggle against Khartoum. The plight of the Nuba people was recently highlighted by Africa Rights, a non-governmental organisation. Many of the Beja in the east have joined the opposition through the Beja Congress. A settlement that did not take account of their interests would not be acceptable. We therefore continue actively to support the IGAD process.
We support the process both in public and in private. My hon. Friend the Minister of State made clear our welcome for the renewed talks on 30 September. We were a party to the EU statement of welcome and encouragement at the start of the talks. We have been in touch with all parties, urging them to approach the talks constructively and in good faith.
The hon. Gentleman mentioned the recent fighting in the south of Sudan, and asked whether I had any recent news of it. As he said, it has reportedly been taking place in several areas. We know of reports of it in the Wau area. It is unclear who is winning, but it is clear that the cost of fighting has been further human suffering. As always, the innocent bear as much of the brunt as those directly involved.
The hon. Gentleman mentioned Sudanese chemical warfare capabilities, and drew attention to his exchange with my right hon. Friend the Foreign Secretary and to the recent United States report claiming that Iraq had helped Sudan to develop such capabilities. The Foreign and Commonwealth Office cannot validate those reports, and is not aware of any fresh or substantiated evidence on the matter.
The hon. Gentleman raised the important question of human rights. I, too, have been a Sudan watcher over many years, and the human rights situation in Sudan


continues to give serious concern. Increased respect for human rights in Sudan is a centrepiece of our policy. We want a peaceful, democratic Sudan, where the human rights of all citizens are equally respected. I endorse the hon. Gentleman's demand for pluralism in Sudan. We recognise pluralism in our country, and support it in all countries.

Rev. Martin Smyth: Does the Minister agree that people purporting to be Christian rebels have also been guilty of some violations of human rights?

Mr. Lloyd: With the hon. Gentleman, we deplore the abuse of human rights from whatever quarter. Human rights are indivisible: they cannot be partial or arbitrarily based.
In that context, the UK was active in securing the passage of resolutions highly critical of Sudan at the UN General Assembly in each year between 1992 and 1997, and in getting agreement at the UN Commission on Human Rights to the appointment of the special rapporteur. The rapporteur's most recent report—October 1997—expresses deep concern about the serious, widespread and continuing human rights violations in Sudan. The update of that report has yet to be issued, but we believe that it is due any day now. As far as we are aware, there has been no change in respect of the special rapporteur's freedom of movement.
One of the hon. Gentleman's specific human rights concerns involved the practice of the Government of Sudan of conscripting secondary school children. Her Majesty's Government have expressed their deep concern about that practice to the Government of Sudan, who defended themselves, claiming that every country in the world has conscription, and that defence of one's country is a national duty. We shall continue to monitor the situation, and will raise the matter again if evidence of its continuation emerges.
Human rights work constitutes a major part of the work of the embassy in Khartoum. Staff there raise specific cases with the Sudanese authorities, and make use of their

contacts to urge greater respect for human rights. For example, our ambassador has raised recent church destructions with the National Islamic Front leader, Dr. Hassan al Turabi.
With regard to the hon. Gentleman's points about abductions, we unconditionally condemn all forms of slavery. Even if that is not Government policy, as the Government of Sudan claim, they are at least morally responsible, and we hold them accountable to suppress the practice.
The hon. Gentleman asked about the ability of aid to reach all quarters. There are difficulties in getting aid throughout the length and breadth of Sudan—that is a matter of practical fact. However, we continue to put pressure on the Sudanese Government to ensure that it gets through as widely as possible. Since January 1991, we have committed more than £137 million to Sudan, including our share of EU assistance for humanitarian aid. Last year, we gave more than £3 million in food aid to various parts of Sudan, and we recently announced a pledge of £4 million for emergency food and non-food aid in support of the UN consolidated appeal.
The issue of sanctions and embargoes against Sudan allowed the hon. Gentleman to propose an interesting alternative to existing measures. We will look at any proposal for further UN sanctions on its own merits and in the light of non-compliance by the Government of Sudan.
I have been unable to respond to several of the hon. Gentlemen's points, but I should like to conclude by saying that we are with him in our concern that the people of Sudan are the ones who have suffered during the long years of the civil war. We and all the friends of Sudan are doing all we can to bring the suffering of those proud and decent people to an end. That must be the resolve of the House, the Government and the world community. However, the responsibility now lies with the Government of Sudan, and we all hold them accountable to ensure that they play a part in that task.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes to One o'clock.